Tulsi Tracom Private Limited v. Commissioner Of Income Tax – 9

$~5 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 853/2015 TULSI TRACOM PRIVATE LIMITED ..... Appellant Through:Mr. C.S. Aggarwal, Senior Advocatewith Mr. Prakash Kumar and Ms.Pushpa Sharma, Advocates. versus COMMISSIONER OF INCOME TAX – 9 ..... RespondentThrough:Mr.AshokManchanda,SeniorStandingCounselwithMr.Raghvendra Singh and Mr. Anand K.Chaudhari, Advocates. CORAM:JUSTICE S.MURALIDHARJUSTICE PRATHIBA M. SINGH O R D E R%14.09.2017 Prathiba M. Singh J., 1. This is an appeal under Section 260 A of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) impugning order dated 30[th]July, 2015passed by the Income Tax Appellate Tribunal (‘ITAT’) Kolkata, Bench-B,Kolkata in ITA No. 1905/Kol/2013 for the Assessment Year (‘AY’) 2008-09. 2. On 17[th]December, 2015, this Court had rejected the preliminary objectionraised by the Respondent as regards the maintainability of the appeal on the ITA 853/2015Page 1 of 11 ground of lack of territorial jurisdiction. The appeal was admitted and thefollowing two questions of law were framed: “(i) Did the notice dated 18[th]March 2013 issued by theCommissioner of Income Tax, Kolkata to the Assessee atthe address shown therein satisfy the requirements ofSection 263(1) of the Act as regards providing theAssessee an opportunity of being heard? (ii) If the answer to questions (i) is in the affirmative,whether on merits the order dated 30[th]March 2013passed by the Commissioner of Income Tax, Kolkataunder Section 263 of the Act is sustainable in law.” Brief facts 3. The Appellant is a company engaged in the business of trading andinvestment of shares and is assessed to tax. It had filed its return of incomefor AY 2008-09 on 16[th]May, 2008 before the ITO Ward-4(1), Kolkata(hereinafter referred to as ‘ITO’). Proceedings were initiated under Section147 of the Act and the assessment order was passed on 10[th]May, 2010under Section 143(3)/147 of the Act. According to the Appellant, whilepassing the assessment order under Sections 143 (3)/147, the AssessingOfficer (‘AO’) had conducted a detailed inquiry with respect to theAppellant’s books of accounts and the share capital contribution from thevarious shareholders. 4. At the time of filing of the returns for AY 2008-09, the Appellant had itsregistered office at 2, Raja Woodmunt Street, Kolkata-700001(`hereinafterreferred as ‘Raja Woodmunt Street’). It thereafter shifted its registered ITA 853/2015 office to 14, Weston Street, 2[nd]Floor, Kolkata-700012. This shifting of theregistered office was duly communicated to the Ministry of CompanyAffairs on 1[st]June, 2010. For AY 2010-11 and 2011-12 it filed its returnwith this address. With effect from 31[st]May, 2012, the Appellant shifted itsregistered office to B-222, 2[nd]Floor, Okhla Industrial Area, Phase-I, NewDelhi-110020 (hereinafter `Delhi address'). For AY 2012-13 it filed itsreturn on 25[th]September, 2012, reflecting this address. 5. On 18[th]March, 2013, the Respondent issued a show cause notice (‘SCN’)under Section 263 of the Act proposing to revise the assessment order dated10[th]May, 2010 under Section 143 (3)/147 for AY 2008-09. Pursuant to thesaid notice, order dated 30[th]March, 2013 came to be passed by theCommissioner of Income Tax (‘CIT’) holding that the assessment orderdated 10[th]May, 2010 passed by AO was erroneous and prejudicial to theinterest of the Revenue. The CIT directed the AO to pass a fresh assessmentorder after conducting adequate inquiries and verification. 5. On 18[th]March, 2013, the Respondent issued a show cause notice (‘SCN’)under Section 263 of the Act proposing to revise the assessment order dated10[th]May, 2010 under Section 143 (3)/147 for AY 2008-09. Pursuant to thesaid notice, order dated 30[th]March, 2013 came to be passed by theCommissioner of Income Tax (‘CIT’) holding that the assessment orderdated 10[th]May, 2010 passed by AO was erroneous and prejudicial to theinterest of the Revenue. The CIT directed the AO to pass a fresh assessmentorder after conducting adequate inquiries and verification. 6. Thereafter, the AO passed a fresh assessment order on 29[th]March, 2014for AY 2008-09 under Sections 144/263/143 (3)/147 of the Act, assessingthe Appellant and making an addition of Rs. 4,39,70,000/- as unexplainedcash credit under Section 68 of the Act. On 3[rd]September, 2015, the CIT(A)-2 Kolkata allowed the appeal of the Assessee and held that theAppellant was able to establish the identity and authenticity of the shareapplicants as also the genuineness of the transaction and deleted the additionof Rs. 4,39,70,000/- made under Section 68 of the Act. This order of the AOdated 29[th]March 2014 is not subject-matter of this Appeal. ITA 853/2015 Page 3 of 11 7. Independently of the proceedings before the AO, the Assessee challengedthe order dated 30th March 2013 passed by the CIT before the ITAT. TheITAT dismissed the said appeal on 30[th]July, 2015, thereby upholding thenotice under Section 263 and the order passed thereon. Submissions of the Appellant 8. Mr. C.S. Aggarwal, learned Senior Counsel appearing for the Appellantsubmits that the notice under Section 263 of the Act was never issued toand/or served upon the Appellant and hence it was not given a hearing priorto the passing of the order dated 30[th]March, 2013. The main plank of thesubmissions of Mr. Aggarwal is that the ITO had sent the notice underSection 263 to an incorrect address which resulted in the Appellant notbeing given an opportunity of being heard on 22[nd]March, 2013 before theITO. A copy of the said SCN dated 18[th]March, 2013 is on record whichshows that the same is addressed to the Appellant with the Raja WoodmuntStreet address. It is his submission that this address was the old address ofthe Appellant and the ITO had sufficient knowledge of the shifting of theregistered office of the Appellant, in view of the various returns filed for theAY 2009-10, 2010-11, 2011-12 and 2012-13. 9. Mr. Aggarwal relies on the note sheet of the Respondent’s file whichshows that the copy of the notice under Section 263 was returned to the ITOand was placed back on the file. According to Mr. Aggarwal the order dated30[th]March, 2013 was thus passed without hearing the Appellant and is thusbad in law. Mr. Aggarwal submits that the note sheet reveals a noting that ITA 853/2015Page 4 of 11 ‘the evidence of shifting of registered office of the company filed by the `a'(sic Assessee) is received and placed on filed’. According to Mr. Agarwalthis noting is deliberately undated as the ITO was well aware of the newregistered office of the Appellant. 10. Mr. Aggarwal specifically placed reliance upon CIT vs. ChandraAgencies 10 Taxmann.com 176 (Del) (hereafter ‘Chandra Agencies’) asalso Rajesh Kumar vs. DCIT [2006] 287 ITR 91 (SC) and J.T. (India)Exports vs. Union of India [2003] 262 ITR 269 (Del) to submit that sinceno notice was served upon the Appellant, no notice was received by theAppellant, and the Appellant having not been given an opportunity of beingheard, the proceedings under Section 263 are thus, void and the order passedpursuant to the said notice is contrary to law and unsustainable. 11. Mr. Aggarwal also refers to Section 282 of the Act to submit that serviceof the notice ought to have been done in compliance with any of the modesprovided and recognised therein and in the absence of the same there was noproper opportunity of hearing afforded to the Assessee. Submissions of the Respondent 11. Mr. Aggarwal also refers to Section 282 of the Act to submit that serviceof the notice ought to have been done in compliance with any of the modesprovided and recognised therein and in the absence of the same there was noproper opportunity of hearing afforded to the Assessee. Submissions of the Respondent 12. Mr. Manchanda, Senior Standing Counsel for the Revenue has takenpains to point out to the court that the Revenue had in fact issued the noticeto the correct address i.e. the Delhi address of the Appellant. He points to theoriginal file from the ITO, produced in Court, to demonstrate that the noticedated 18[th]March, 2013 was initially issued to the Appellant at the RajaWoodmunt Street address. However, when the notice server went to deliver ITA 853/2015Page 5 of 11 the same, he was informed of the correct address at New Delhi.Accordingly, the same notice of 18[th]March, 2013 was re-posted to the Delhiaddress of the Appellant on 20[th]March, 2013. Mr. Manchanda produced theoriginal envelope as also the acknowledgment slip to show the handwrittennoting of the notice server of the new address on the acknowledgement slipand the re-posting of the same to the Delhi address of the Appellant. Hesubmits that even the notice to the Delhi address was returned to the ITO,Kolkata who then proceeded ex-parte and passed the impugned order dated30[th]March, 2013. According to Mr. Manchanda, the ITO is left with nooption under such circumstances as he has complied with the requirementsunder Section 263. In fact, according to Mr. Manchanda, no notice needs tobe issued under Section 263 as per the judgment of the Hon’ble SupremeCourt in CIT vs. Amitabh Bachchan [2016] 384 ITR 200 (hereinafter‘Amitabh Bachchan’) and only a hearing is to be given. 13. Mr. Manchanda vehemently contends that the Assessee was all alongaware of the proceedings and there was a lapse by the Assessee in informingthe ITO about the change of its address. Mr. Manchanda relies upon a letterof the Assessee intimating the ITO of the factum of shifting of its registeredoffice to New Delhi. He submits that while the copy of the letter filed by theAssessee at page 5 of the additional documents shows delivery of the saidletter on 8[th]April, 2013, the letter itself is undated. This is a deliberatemischief played by the Assessee who was well aware of the proceedingsunder Section 263. The fact that the letter is undated and received only on 8[th]April, 2013, which is subsequent to the order dated 30th March 2013, showsthat an incorrect averment is made in the writ petition that the Assessee had ITA 853/2015 Page 6 of 11 informed the ITO of the change of its registered office prior to the orderdated 30[th]March, 2013. Mr. Manchanda, thus submitted that there was noerror on the part of the ITO in passing the impugned order and the samedeserves to be sustained. Analysis and Findings 14. The law insofar as it relates to a notice under Section 263 is well-settledby the judgement of the Supreme Court in Amitabh Bachchan (supra).Para 11 of the said judgment reads as under: ITA 853/2015 Page 6 of 11 informed the ITO of the change of its registered office prior to the orderdated 30[th]March, 2013. Mr. Manchanda, thus submitted that there was noerror on the part of the ITO in passing the impugned order and the samedeserves to be sustained. Analysis and Findings 14. The law insofar as it relates to a notice under Section 263 is well-settledby the judgement of the Supreme Court in Amitabh Bachchan (supra).Para 11 of the said judgment reads as under: “…11. It may be that in a given case and in most casesit is so done a notice proposing the revisional exerciseis given to the Assessee indicating therein broadly oreven specifically the grounds on which the exercise isfelt necessary. But there is nothing in the section(Section 263) to raise the said notice to the status of amandatory show-cause notice affecting the initiation ofthe exercise in the absence thereof or to require theCommissioner of Income-tax to confine himself to theterms of the notice and foreclosing consideration ofany other issue or question of fact. This is not thepurport of Section 263. Of course, there can be nodispute that while the Commissioner of Income-tax isfree to exercise his jurisdiction on consideration of allrelevant facts, a full opportunity to controvert the sameand to explain the circumstances surrounding suchfacts, as maybe considered relevant by the Assessee,must be afforded to him by the Commissioner ofIncome-tax prior to the finalisation of the decision….” (emphasis added) 15. Thus, what is required to be given is a full opportunity to the Assessee to ITA 853/2015 controvert the contents of the notice under Section 263 of the Act andexplain the circumstances as may be considered to be relevant by theAssessee. 16. The short question that, therefore, arises is as to - whether such anopportunity was afforded to the Appellant in the present case? 17. A perusal of the records reveals that the ITO was well aware of thevarious addresses of the Appellant including the latest address at New Delhiat the time when the notice under Section 263 of the Act dated 18[th]March,2013 was to be issued. The Appellant had filed its return for AY 2012-13 on25[th]September, 2012 i.e. a full five months prior to the issuance of thenotice under Section 263 of the Act. Thus, the first error committed by theITO was to issue the notice under Section 263 on 18th March 2013, to theaddress of the Appellant which was changed as far back in AY 2010-11.There was no justification whatsoever to issue a notice of hearing underSection 263 of the Act to the Assessee at an address which was at least threeyears old. This shows that the ITO did not do the bare minimum of evenperusing the various returns filed by the Assessee prior to the issuance of thenotice. 18. From the records produced before us, the submission of Mr. Manchandais correct to the extent that the notice which was returned to the ITO was re-posted to the Delhi address of the Appellant on 20[th]March, 2013.Whatneeds to be borne in the mind, however, is that the notice was dispatched on20[th]March, 2013 to the Delhi address and the hearing was fixed for 22[nd] ITA 853/2015Page 8 of 11 March, 2013 at 4pm in the ITO's office at Kolkata. This notice sent on 20thMarch 2013, was also returned to the ITO, Kolkata on 25[th]March, 2013,with an endorsement at the back of the envelope, which was not readableeither to the counsels or the Court. 19. While agreeing with Mr. Manchanda that the notice was issued on 20[th]March, 2013, to the Delhi address, the question as to whether it constituted afull opportunity to the Assessee to attend the hearing on 22[nd]March, 2013needs no answer as it is obvious that even if the notice had been served, theAssessee did not have adequate time to attend a hearing in Kolkata. Undersuch circumstances, the CIT recorded in the impugned order dated 30[th]March, 2013 that it is proceeding ex-parte in the matter. The noting in theimpugned order reads: March, 2013 at 4pm in the ITO's office at Kolkata. This notice sent on 20thMarch 2013, was also returned to the ITO, Kolkata on 25[th]March, 2013,with an endorsement at the back of the envelope, which was not readableeither to the counsels or the Court. 19. While agreeing with Mr. Manchanda that the notice was issued on 20[th]March, 2013, to the Delhi address, the question as to whether it constituted afull opportunity to the Assessee to attend the hearing on 22[nd]March, 2013needs no answer as it is obvious that even if the notice had been served, theAssessee did not have adequate time to attend a hearing in Kolkata. Undersuch circumstances, the CIT recorded in the impugned order dated 30[th]March, 2013 that it is proceeding ex-parte in the matter. The noting in theimpugned order reads: “The showcause notice, which was served by postcalling for compliance on 22-03-2013. The notice wasreturned by the postal authority 25.03.2013. Thisorder is therefore being passed ex-parte.” 20. The CIT who issued the order under Section 263 of the Act ought tohave been fully satisfied that adequate opportunity was given to theAssessee to controvert the facts stated in the notice under Section 263 of theAct and to explain the circumstances surrounding such facts. Thesatisfaction of the CIT on these counts could not have been arrived at as perthe narration of facts and events as discussed hereinabove as the processcommencing with the issuance of the notice under Section 263 culminatingin the order dated 30th March 2013, was completed hurriedly - in a matter of10 days even if the date of posting of the notice i.e., 20th March 2013 is ITA 853/2015 included. Thus, the satisfaction of the CIT was misplaced. 21. The ITO, Kolkata could not have expected the Assessee to receive thenotice being posted on 20[th]March, 2013, and attend the hearing on 22[nd]March, 2013. This Court has no doubt that this does not constitute fullopportunity as required by the Supreme Court in Amitabh Bachchan(supra) in respect of a notice under Section 263 of the Act. 22. It, thus, appears that the notice having been given initially at the wrongaddress and thereafter posted to the correct address just two days prior to thesaid hearing and the said notice also having been returned unserved due tothe reasons which are not decipherable, the requirement under Section 263(1) of the Act is not satisfied. In Chandra Agencies (supra) this Court hasgone to the extent of holding that refusal by the Assessee’s son to receivethe notice under Section 148 of the Act does not constitute good service. 23. This Court has also examined the question as to whether an opportunityof hearing could now be afforded to the Appellant. However, Section 263(2) of the Act is a clear bar for any order being passed pursuant to a noticeunder Section 263 of the Act, after the expiry of two years from the end ofthe financial year in which the order sought to be revised was passed. Thus,there is an outer limit in the statute under Section 263 which, in the presentcase, is 31[st]March, 2013. Since, no useful purpose will be served in givingan opportunity to the Appellant of being heard at this stage, this Courtanswers question No.1 in the negative i.e. in favour of the Assessee and ITA 853/2015 against the Revenue. 24. In view of the above, question No.2 does not survive.The appeal isallowed and the notice dated 18th March 2013 as also order dated 30[th]March, 2013 are set aside. There will be no order as to costs. PRATHIBA M. SINGH, J SEPTEMBER 14, 2017‘ns’ S.MURALIDHAR, J