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TMI Blog2021 (10) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) ] dated 30.08.2019. 2. Since, in all these appeals assessees raised the identical grounds and for the sake of convenience all the appeals are heard together and common order is order passed. 3. First we take up the appeal in ITA. No. 7370/Mum/2019 for the A.Y. 2011-12 in the case of Kishore H. Ajmera (HUF). Assessee has raised following grounds in its appeal:- 1. NATURAL JUSTICE 1.1 The Learned Commissioner of Income - tax (Appeals) - 48, Mumbai ['Id. CIT(A) ] erred in not granting proper, sufficient and adequate opportunity of being heard to the Appellant while framing the appellate order. 1.2 It is submitted that, in the facts and the circumstances of the case, and in law, the appellate order so framed be held as bad and illegal, as: (i) The same is framed in breach of the principles of natural justice; and (ii) The same is passed without application of mind to the facts and the submissions brought on record by the Appellant. WITHOUT PREJUDICE TO THE ABOVE 2. REASSESSMENT 2.1 The Ld. CIT(A) erred in confirming the action of the A.O. in initiating reassessment proceedings and framing the assessment of the Appellant by invoki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer is bad, illegal and without jurisdiction for the reason that the Assessing Officer ignored the mandatory requirement of disposing off objections raised by the assessee for reopening the assessment u/s. 147 of the Act. Ld. Counsel for the assessee referring to Para No. 4 of the re-assessment order at Page No. 11, submitted that the Assessing Officer stated that assessee never submitted any objections and therefore disposing off the objections does not arise is contrary to record. Referring to Page Nos. 81 to 92 of the Paper Book Ld. Counsel for the assessee submits that in the course of proceedings before the Assessing Officer assessee made elaborate submissions and preliminary objections on reopening of assessment and these objections were never disposed off by the Assessing Officer before framing the assessment, therefore, rendering the assessment order bad in law. 5. Ld. Counsel for the assessee placed reliance on the following decisions:- (i) DCIT v. M/s. Firstsource Solutions Ltd., in ITA. No. 3985 3986/Mum/2016 dated 22.05.2019. (ii) Maharashtra State Power Generation Co. Ltd., v. Addl. CIT in ITA. No. 2043/Mum/2011 dated 31.07.2019. Referring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the orders of the authorities below. Ld. DR referring to Para No. 3 and 4 at Page No. 10 of the Assessment Order passed u/s. 143(3) r.w.s. 147 of the Act on 29.09.2016 in the case of M/s. Jiten K. Ajmera (HUF) for the A.Y. 2012-13, submitted that the Assessing Officer has given the chronology of events as under:- Therefore proceedings u/s. 147 of the income tax Act, 1961 was initiated by issue of notice u/s. 148 of the I.T. Act 1961 dated 25.02.2016 with prior approval of the Addl. CIT Central Range-2, Mumbai. The assessee filed letter dated 30th March 2016 stating that the return of income filed originally may be treated as return of income in response to notice u/s. 148. 4. Thereafter notice u/s. 143(2) and 142(1) r.w.s 147 of the I.T. Act, 1961 was issued time to time. The assessee submitted its reply vide letter dated 09.05.2016 and 28.07.2016. The assessee never submitted any objections to notice u/s. 148 of the I.T. Act, 1961. Therefore, the question of disposing off the objections to notice u/s. 148 of the I.T. Act, 1961 does not arise. 10. Ld. DR referring to Page No. 4 submitted that the Assessing Officer stated in the Assessment Order that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial Ltd. (supra) would not apply (Copy enclosed) Annex-A 8. Hon'ble Madras High Court in the case of Home Finders Housing Ltd. Vs. Income Tax Officer, reported in (2018) 93 taxmann.com 371 (Madras) dated April 25, 2018 has also adjudicated the similar issue in favour of Revenue. (Copy enclosed)- Annex B C. 9. In view of the above facts, it is very clear that the AO had followed the procedure laid down in the Act while completing the re-assessment proceedings; hence ground raised by the Appellant has no merit. 12. In the rejoinder Ld. Counsel for the assessee submitted as under:- 2.1 The argument of the Ld. DR that there was undue delay on the part of the Appellants in filing of the objections to the initiation of the reassessment proceeding and, consequently, the non - disposal of the objections of the Appellant by the A.O. is to be ignored, is mis-placed. This is for the following reasons: (i) As is evident, the reasons for reopening provided by the Assessing Officer on 08.04.2016, running into 8 pages, involved substantial factual aspects search and seizure and that too, at a third party's place. In order to submit ' detailed and meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed delay on the part of the Appellants. Interesting, the Ld. CIT(A) in the impugned order herself has categorically observed that '...In any case the assessment was completed on 29.09.2016, which is within a fair and reasonable short period of receipt of assessee's letter dated 26.07.2016...' (vi) In fact, after filing of the objections by the Appellant on 28.07.2016, no notice u/s. 142(1) of the Act was issued by the Assessing Officer to make any further enquiry/verification on merits of the case. Thus, it was not a case where the Assessing Officer was wanting to make any enquiry/verification but due to shortage of time could not do so. 2.2 Now as far as the legal position is concerned, the reliance placed by the Ld. DR on the decision of the Hon'ble Bombay Court in the case of Mohammedally Noorbhoy Bandukwala Trust v. ITO (E) is misplaced because the said decision is clearly distinguishable on the facts of the case. In this case, the objections were filed by the Petitioner therein on 19.12.2016, which were disposed off by the assessing officer on 22.12.2016 and the assessment was getting time barred on 31.12.2016 and thus, the High Court held that the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued notice u/s. 148 of the Act dated 25.02.2016 for reopening of assessment u/s. 147 of the Act. Assessing Officer also issued notice u/s. 143(2) of the Act calling for the details and objections. Assessee vide letter dated 28.07.2016 submitted detailed preliminary objections for reopening of assessment and not to proceed further and these objections are as under:- With reference to your above Notice, we have to submit as under:- 1. Vide your Notice dated 16.07.2016 you have called upon us to explain as to why the Long Term Capital (LTG), gain earned by us not be taxed. 2. At the outset, we strongly object to the observation made by you in your reason for reopening of assessment given alongwith notice dated 08.04.2016 for the following amongst other grounds as mentioned herein below. 3. We say that our all transactions executed are genuine, and at the prevailing market rate, as per the trend of the market and are duly supported by all possible evidences. 4. On perusing your reason for reopening of assessment it is seen that, you have relied upon two so called evidences to support the allegation, A. The statement of Shri Jasmin Ajmera taken during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely no evidentiary value, on fact, as well as in law. In view of the above, it is submitted that your reliance on the statement of Shri Jasmin Ajmera is not valid, on fact, as well as in law. B. Search proceeding against Shri Shirish C. Shah It appears that your observation is also based on the alleged information gathered in course of search action against one Shri Shirish C. Shah. Your good office has provided us data collected by you from BSE Ltd. with respect to the transactions in the shares of Prraneta Industries Ltd., now known as Adhaar Venture India Ltd. [ Prraneta ] for the period 01.04.2009 to 31.12.2011 and a pen drive, which contains copies of the material alleged to have been seized in course of the search and survey action taken against one Shri Shirish C. Shah, running into thousands of pages. You have also given hard copies of some affidavits of various persons, who are alleged to be directors of various companies, again alleged to be managed by Shirish Shah. In this regard, we have to submit as under:- I. Data provided of BSE Ltd. 1. It appears that this data shows sale and purchase transactions of Prraneta. 2. Our preliminary observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Reference copies enclosed for ready reference. Prraneta is registered as NBFC with RBI (copy enclosed). If you still intend to hold otherwise, it is your duty to bring cogent material in support thereof. 5. As such, your listing down names of various parties who supposed to have purchased the shares sold by us has absolutely no bearing on our case, as we are not at all concerned with the names of the purchasers, much less we also would not have the knowledge as to why such person purchased the said shares. Therefore, in any case, we had absolutely no concern with the alleged group purchasing the said shares, much less their reason for purchasing the same. 6. Ongoing through the list of the entities who alleged to have purchased the shares sold by us and which alleged to have been managed and owned by Shirish Shah are public limited listed companies. For example, Avance Technologies Ltd./Mahan Industries Ltd. and few more. Sir, How can that be possible? We believe that public listed companies are owned by the shareholders of the said company. 7. Kind attention Is also drawn to the quantity of the shares, i.e. to say that the quantity of the shares which were sold b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to us on fact as well as in law. This is, of course, without prejudice to our preliminary objection to let us know the precise material that you Intend to rely upon ultimately and the reason thereof so as to enable us to give meaningful reply thereon. III. AFFIDAVITS FILED BY THE DIRECTORS OF THE COMPANIES ALLEGED TO BE MANAGED AND CONTROLLED BY SHIRISH SHAH:- 1. At the outset, we fail to understand in what way such affidavits are sought to be used against us. Therefore, we request you to let us know the exact relevance of these affidavits in our case, so as to give meaningful reply thereafter. 2. Strictly without prejudice to the above and under protest, our preliminary observations in this regard are as under: i) First of all, Ex- facie, these affidavits do not at all directly, indirectly or remotely concern us, nor do they indicate involvement of ourselves in any transaction, much less in any dubious transaction. ii) Besides, our few observations regarding the affidavits are as under: (a) In all, there are 134 affidavits/declarations and all are stereotyped. (b) Some documents are styled as affidavits and some documents are styled as decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer without disposing off the preliminary objections proceeded and completed the re-assessment stating that the assessee never submitted any objections to the notice issued u/s. 148 of the Act and therefore the question of disposing of the objections does not arise. The observation of the Assessing Officer is misplaced as the assessee did file its preliminary submissions/objections which were not disposed off before completion of re-assessments. 15. In the case of Maharashtra State Power Generation Co. Ltd., v. Addl. CIT (supra) the Tribunal considering the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., v. ITO (supra) and the decision of the Hon'ble Jurisdictional High Court in the case of KSS Petron Pvt. Ltd., v. ACIT (supra) and also the decision of the Coordinate Bench in the case of DCIT v. Firstsource Solutions Ltd. (supra) quashed the reassessment order passed u/s. 143(3) r.w.s. 147 of the Act. While quashing the re-assessment order the Coordinate Bench observed as under:- 2.1 The Ld. Authorized Representative for Assessee [AR], at the outset, submitted that the objections raised by the assessee against reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was not disposed-off by Ld. AO, remain uncontroverted. Nothing on record would establish that the assessee's objections against reopening of assessment were ever considered and rejected by Ld. AO at any point of time, during reassessment proceedings. 3. After due consideration of factual matrix, we find that the binding judicial precedent in the shape of cited decision of Hon'ble Bombay High Court squarely applies to the fact of the case. The relevant observation of Hon'ble court, for ease of reference, could be extracted in the following manner:- 8. We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered rival submissions and perused the material on record. Undisputed factual position, as culled out from the material on record, clearly reveals that in the course of re-assessment proceedings, though, the assessee had raised objections challenging the validity of re-opening of assessments under section 147 of the Act, however, the Assessing Officer has not disposed of the objections independently by way of separate orders before completion of assessment proceedings under section 143(3) r/w 147 of the Act. The Hon'ble Supreme Court in GKN Driveshafts India Ltd. (supra) has held that before completion of the assessment, the Assessing Officer is duty bound to dispose of the objections of the assessee separately. Therefore, the Assessing Officer in the instant appeal has not followed the due judicial process while dealing with the objections of the assessee. For that reason, the impugned assessment orders are legally unsustainable. Now the issue which arises is, whether in such circumstances, the re-assessment orders passed have to be quashed as void ab initio or they are to be restored back to the Assessing Officer for enabling him to dispose of the objections of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairly well settled legal position that dismissal of SLP in limine at the stage of admission without a speaking or reasoned order does not constitute a binding precedent under Article-141 of the Constitution of India. This principle has been well propounded in case of Kunhayammed Vs. State of Kerala 2001(129) ELT 11 (S.C.). Aforesaid view was again affirmed by the hon'ble Supreme Court in case of Khoday Distilleries Ltd. Vs. Shree Mahadeshwara Sahakara Sakkare Karkhane Ltd. while disposing of Civil Appeal no. 2432 of 2019 in judgment dated. 01.03.2019. Therefore, it cannot be said that in the aforesaid decision, the Hon'ble Supreme Court has laid down the proposition that non-disposal of objections against the validity of proceedings initiated under section 147 of the Act is a procedural irregularity which can be cured if the Assessing Officer is given an opportunity to dispose of the objections of the assessee and thereafter complete the assessment. Moreover, the decision of the Hon'ble Supreme Court in GKN Driveshafts India Ltd. (supra) has not been overruled and still holds the field. The next decision cited by the learned Departmental Representative is of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals are dismissed. Respectfully following the cited binding judicial precedents, the action of Ld. first appellate authority in upholding the reassessment proceedings, could not be said to be in accordance with law. Therefore, we quash the reassessment order dated 29/12/2009 passed by Ld. Assessing Officer. In view of the same, dealing into the merits of the case become merely academic in nature and therefore, we refrain from dealing the same. Ground No. 1 stands allowed which makes other grounds of appeal infructuous. 16. In the case of Fomento Resorts Hotels Ltd., v. ACIT (supra) the Hon'ble Bombay High Court held as under: 13. In the present case, the Appellants did lodge their objections vide letter dated 14th April, 2003. By a further letter dated 25th March, 2004, the Appellants requested the Assessing Officer to dispose of such objections by passing a speaking order before proceeding with the reassessment in respect of the Assessment Year 1997-98. However, the Assessing Officer, without proceeding to dispose of the objections raised by the Appellants by passing a speaking order, straight away proceeded to make the assessment order dated 26th March, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned ITAT and as such no substantial question of law arises as well. Appeal dismissed. 16. The Respondent, instituted a Special Leave to Appeal (Civil) No. 5711/2007 which was, however, dismissed by the Hon'ble Apex Court vide order dated 16/7/2007, by observing that there were no merits. 17. Accordingly, for the aforesaid reasons, we are unable to accept Ms. Linhares's contention based upon the any alleged variance between the provisions of the said Act and the provisions of the Income Tax Act, in so far as applicability of the principles in GKN Driveshafts (India) Ltd. (supra) is concerned. 18. The moot question is, therefore, the disposal of the objections by the Assessing Officer in his assessment order dated 26th March, 2004 constitutes sufficient compliance with the procedure prescribed by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) or, whether it was necessary for the Assessing Officer to have first disposed of the Appellant's objections by passing a speaking order and only upon communication of the same to the Appellants, proceeded to reopen the assessment for the Assessment Year 1997-98. 19. Virtually, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer was not justified in finalizing the Assessment, without having first disposed of the objections of the appellant. This impugned order holds the Assessing Officer is obliged to do in terms of the Apex Court's decision in GKN Driveshafts (India) Ltd., v/s. ITO 259 ITR 19. In the aforesaid circumstances, the order of the CIT(A) and the Assessing Officer were quashed and set aside. However, after having set aside the orders, it restored the Assessment to the Assessing Officer to pass fresh order after disposing of the objections to reopening notice dated 28th March, 2008, in accordance with law. 8. We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee observing as under:- 4. We have heard both the parties and perused the records. We find that in these cases the assessing officer has in his assessment order noted that assessee did not file the objection to the reopening. However learned CIT(A) in his order has noted this aspect. He has also reproduced one of the letters by the assessee to the assessing officer wherein objections to reopening were duly raised. 5. However learned CIT(A) is of the opinion that honourable Supreme Court decision in GKN Driveshaft does not hold that the reassessment will be bad if objection are not disposed of. In this regard, on this premise he has rejected the assessee's contention that assessment is bad in as much as objections to reopening have not been disposed off. However we note that the above view of the learned CIT appeals is not in accordance with honourable Bombay High Court decision in the case of Fomento Resorts Hotels Ltd. (supra) dealt with in the above said order of the ITAT. It is settled law the order of honourable jurisdictional High Court is binding upon the subordinate courts and tribunals. We find that learned CIT appeals has erred not fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was provided by the Assessing Officer to the assessee on 08.04.2016 and the assessee could file its exhaustive objections running into twelve pages on 28.07.2016 and the assessments were getting time barred on 31.12.2016. Therefore, it is evident that there was five months time available for completion of re-assessment by the Assessing Officer. The Assessing Officer also had sufficient time i.e., five months to dispose off the objections filed by the assessee. However, the Assessing Officer without disposing off the objections completed the re-assessment on 28.09.2016 u/s. 143(3) r.w.s. 147 of the Act, even though the assessment was getting time barred on 31.12.2016. In view of these facts the ratio of the judgement relied on by the Ld. DR in the case of Mohammedally Noorbhoy Bandukwala Trust v. ITO (supra) is clearly distinguishable on facts and has no application to the case of the assessee. 23. Further, the reliance placed by the Ld. DR on the decision of the Hon'ble Madras High Court in the case of Home Finders Housing Ltd., v. ITO [ (2018) 93 taxmann.com 371] for the proposition that non-compliance of procedure indicated by Hon'ble Supreme Court in the case of GKN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Assessing Officer is bound to furnish reasons within a reasonable time, on receipt of the reasons, the noticee is entitled to file objections and the Assessing Officer is bound to dispose of the same by passing a speaking order. 40. We do not agree with the interpretation canvassed before us that assuming objections were not disposed of by a speaking order, it would be only a procedural error. 41. We have referred to Kelvinator of India Ltd. (supra), which has pointed out as to how serious is reopening of a concluded assessment, that too, after four years. The Hon'ble Supreme Court has laid down the law and it has been made mandatory for the Assessing Officer to pass a speaking order. The use of the word bound cannot be rendered meaningless. Therefore, we are of the clear view that if there has been a procedural error, it goes to the root of the matter thereby affecting the jurisdiction of the Assessing Officer to proceed further to give a fresh innings to the Assessing Officer on the ground that it is a procedural error, will not only dilute the decision of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. (supra), but would lead to abuse of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing a speaking order, straight away proceeded to make the assessment order dated 26th March, 2004, bringing to charge taxable expenditure on ₹ 10,22,73,987/-. The assessment order dated 26th March, 2004, no doubt, deals with the objections raised by the Appellant and purports to dispose of the same. Ms. Linhares contends that this is a sufficient compliance with the procedure set out in GKN Driveshafts (India) Ltd. (supra), assuming that the same is at all applicable to the proceedings under the said Act. Mr. Dada, however, submits that such disposal in the assessment order itself does not constitute the compliance with the mandatory conditions prescribed by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. (supra). In support, as noted earlier, Mr. Dada relies upon Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra). 14. The contention of Ms. Linhares that the decisions relied upon by Mr. Dada relate to the provisions of the Income Tax Act and, therefore, are not applicable to the proceedings under the Expenditure Tax Act, cannot be accepted. In the first place, the provisions relating to reopening of assessment are almost pari ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants, proceeded to reopen the assessment for the Assessment Year 1997-98. 19. Virtually, an identical issue arose in the cases of Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra) before the Division Benches of our High Court at Bombay. 20. In Bayer Material Science (P) Ltd. (supra), by a notice dated 6/2/2013, the Revenue sought to reopen the assessment in the year 2007-08. The Assessee filed a revised return of income and sought for reasons recorded in support of the notice dated 6.2.2013. The reasons were furnished only on 19.3.2015. The Assessee lodged objections to the reasons on 25th March, 2015. The Assessing Officer, without disposing of the Petitioner's objections, made a draft assessment order dated 30th March, 2015, since this was a matter involving transfer pricing. In such circumstances, the Division Bench of this Court, set aside the assessment order by observing that the Court was unable to understand how the Assessing Officer could, at all, exercise the jurisdiction and enter upon an inquiry on the reopening notice before disposing of the objections on the reasons furnished to the Assessee. This Court held that the procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/old matters. 24. According to us, the rulings in Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra) afford a complete answer to the contentions raised by Ms. Linhares in defence of the impugned order. 25. Since, in the present case, the Assessing Officer has purported to assume the jurisdiction for reopening of the assessment, without having first disposed of the Assessee's objections to the reasons by passing a speaking order, following the law laid down in GKN Driveshafts (India) Ltd. (supra), Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra), we are constrained to hold that such assumption of jurisdiction by the Assessing Officer was ultra vires Section 11 of the said Act. The first substantial question of law will, accordingly, have to be answered in favour of the Appellant and against the Respondent-Revenue. 11. As could be seen from the above decision of the Hon'ble Bombay Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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