Indus Thermal System P.Ltd, Mumbai vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "I", MUMBAI ᮰ी. ᮰ी. संजय अरोरा, लेखा सद᭭य एवं ᮰ी िववेक वमाᭅ, ᭠याियक सद᭭य के समᭃ । BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA No. : 4072/Mum/2013 (Assessment year: 2009-10) DCIT, C-6(1), Vs Indus Thermal System Pvt Ltd, Mumbai 371, Veer Savarkar Marg, Mumbai -400 049 Mumbai -400 020 ःथयी लेखा सं.:PAN: AAACI 2043 Q अपीलाथȸ (Appellant) ू×यथȸ (Respondent) Appellant by : Shri Sacchidanand Dubey Respondent by : Shri R K Bothra

सुनवाई कȧ तारȣख /Date of Hearing : 03-12-2014 घोषणा कȧ तारȣख /Date of Pronouncement : 21-01-2015

आदेश ORDER ᮰ी िववेक वमाᭅ, ᭠या स: स: PER VIVEK VARMA, JM:

The instant appeal has been filed by the department against the order of CIT(A) -14, Mumbai, dated 28.02.2013.

2. At the time of hearing, the AR informed that the entire assessment has been set aside by the coordinate Bench at Mumbai, in ITA No. 2843/Mum/2013, in the appeal filed by the assessee, wherein it was held that the AO had exceeded his jurisdiction by not taking prior approval of the higher authorities. The relevant finding of the ITAT order, is, "The assessee had specifically raised the issue as ground no.1 before the FAA.In our opinion, he should have called for remand report from the AO before deciding the appeal. As there is no evidence that the AO had obtained prior approval of the higher authority in the case under consideration, so in our opinion, he had exceeded his jurisdiction. Instructions issued by the Board may or may not be binding on the assessees, but they are binding on the officers of the department. There is no need to cite case for this well established principle of tax-jurisprudence.

2 Indus Thermal System Pvt Ltd, ITA 4072/M/2013

We find that in the case of Crystal Phosphates Ltd.(supra)Delhi Tribunal had also dealt a matter where similar kind issue had arisen, in the sense that how the cases should be selected for scrutiny of corporate assessees in pursuance of circular issued by the Board. In that matter the assessee had filed return of income on 28-11-2006 declaring income of Rs. 3,97,17,920/-. The case was selected for scrutiny by way of notice dated 17- 10-2007 u/s.143(2) of the Act, under the CBDT Instructions contained in Scrutiny Guidelines Clause 2(v)(b), which provides as under:

2.The following categories of cases shall be compulsorily scrutinized: (v)(b) All cases in which an appeal is pending before the CIT(Appeals) against an addition/disallowance of Rs. 5 lakhs or above, or the Department has filed an appeal before the ITAT against the order of the CIT(Appeals) deleting such an addition/disallowance and an identical issue is arising in the current year. However, as in (i) above, the quantum ceiling may not be taken into account if a substantial question of law is involved."

The assessee, during the course of assessment proceedings vide letter dated 7-12-2007 challenged the assumption of jurisdiction on the ground that no addition/disallowance exceeding Rs. 5 lacs was made in earlier year, which was pending in appeal before the CIT(A). Further, there was no identical issue arising in the current year as arising in earlier year. However, Add. CIT vide order dated 25-11-2008 and the CIT vide order dated 15- 12-2008 rejected the contention of the assessee and held that notice issued was in accordance with law on the ground that in assessment year 2004-05,addition aggregating to Rs. 5,60,207/-were made in order of assessment which was pending in appeal before CIT(A).In the appellate proceedings FAA held that the notice issued was valid since assessee had acquiesced to the notice issued by AO and sought adjournment. He held that the assessee could have approached the higher judiciary for redressal of its grievance that jurisdiction assumed by the AO was not valid. Allowing the appeal of the assessee Tribunal held as under:

"7.We have considered rival submissions of the parties and gone through the relevant material available on record. The undisputed facts are that proceedings for assessment for the year under consideration were commenced by issue of a notice dated 17-10-2007. The authorities below have held that such a notice was valid notice, since the same was in accordance with clause (v) (b) of para 2 of the Instruction issued by the CBDT for selection of cases for corporate assessee for F.Y. 2007-08. The relevant portion of the Instruction has already been reproduced by us hereinabove. The order of assessment for A.Y. 2004-05 which has been made the basis for assumption of jurisdiction, shows that the same was passed u/s.143(3) vide order dated 18-12- 2006. According to order, no disallowance was made in excess of Rs. 5 lace though aggregate of all the disallowances was Rs.5,60,207/-The issue, therefore, arises whether the AO was correct in holding that since disallowance in aggregate exceeded Rs.5 lacs, therefore, notice was valid. In our opinion, such a conclusion is contrary to the express instructions of the CBDT. In our opinion, there has to be an addition or disallowance of Rs. 5 lacs or more against which an appeal is pending and such an issue must also arise in the year 3 Indus Thermal System Pvt Ltd, ITA 4072/M/2013

under consideration. All these facts must be available to the AO on the date of assumption of jurisdiction. The burden is on assessing authority to establish that jurisdiction was assumed in accordance with the instructions of the Board. Thus, in our considered opinion, notice issued u/s 143(2) was not in terms of the instructions issued by the CBDT. Now the question that arises is that since notice issued was not in terms of the instructions issued by the CBDT, can it be held that assumption of jurisdiction was illegal so as to hold the entire proceedings as invalid."

It was further held that once CBDT issued instructions for assuming of jurisdiction for selection of cases of corporate assessee for scrutiny and assessment thereof same had to be followed in later and spirit by the AO, that the burden lied on the authority assuming jurisdiction and establish that such instruction have been duly complied and satisfied. AO was aware that the assessee had challenged his jurisdiction before the Tribunal, even then no evidence was produced from his side, before us, to prove that he had obtained prior approval of the higher authorities, as directed by the above referred instruction of the CBDT. There is no mention of the potential escapement of income of Rs.10 lakhs or more. Therefore, following the decision of the above referred case of Delhi Tribunal and considering the peculiar facts and circumstances of the case, we are reversing the order of the FAA. We decide the first ground of appeal in favour of the assessee. In our opinion, remaining grounds of appeal(Ground No. 2 to 4) are not being adjudicated as we have already held that the order passed by the AO was without jurisdiction".

3. The AR submitted that once the assessment has been held to be invalid, all consequential proceedings are illegal, invalid and infructuous.

4. The DR accepts the fact that ITAT has held the proceedings to be without jurisdiction.

5. Since the assessment itself is held to be illegal, all consequential proceedings are illegal and, therefore, the appeal as filed by the department does not survive at all. As a result, the appeal filed by the department is rejected.

4 Indus Thermal System Pvt Ltd, ITA 4072/M/2013

6. In the result, the appeal as filed by the department is dismissed.

Order pronounced in the open Court on 21st January, 2015.

(संजय अरोरा) (िववेक वमाᭅ) Sd/- Sd/-

लेखा सद᭭य ᭠याईक सद᭭य (SANJAY ARORA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 21st January, 2015

ूित/Copy to:-

1) अपीलाथȸ /The Appellant. 2) ू×यथȸ /The Respondent. 3) The CIT(A) -14, Mumbai. 4) The CIT-VI, Mumbai/CIT -VI, Mumbai.

5) ǒवभागीय ूितिनिध "आई", आयकर अपीलीय अिधकरण, मुब ं ई/ The D.R. "I" Bench, Mumbai.

6) गाड[ फाईल Copy to Guard File.

आदे शानुसार/By Order / / True Copy / /

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, मुबं ई Dy./Asstt. Registrar I.T.A.T., Mumbai

*च᭪हान व.िन.स *Chavan, Sr.PS