Engineering Professional Co. Pvt. Ltd. Vs DCIT (Gujarat High Court)
In the given case, Assessee has filed appeal before ITAT against the order passed by the A.O. u/s 44AD. With respect to that appeal ITAT passed the order and state that “the Assessee is directed to attend the assessment proceedings and justify its claim of lower rate of profit in accordance with its books of account. The A.O. is directed to verify the same and decide the issue afresh after giving a reasonable and fair opportunity of being heard to the assessee.” ITAT has provided in depth direction to A.O. as what points should be considered at the time of fresh assessment.
In the fresh assessment order A.O. has absolutely created new liability for the writ applicant and that too, contrary to the directions issued by the Appellate Tribunal. Now the issue under consideration is whether the order passed by A.O. at the time of fresh assessment is justified in law?
It is stated that “what cannot be done directly could not have been done indirectly”. It is submitted that the order of the Tribunal remitting the matter, more particularly, the last part of the direction is very specific and clear. The Assessing Officer was asked to look into the claim of the assessee with regard to lower rate of profit and while undertaking such exercise, the Assessing Officer appears to have travelled much beyond the issue upon which he was asked to look into
If the appeal would have been dismissed without there being any direction of remitting the matter to the Assessing Officer, then the effect would have been as if the Tribunal has accepted that the case would fall within the section 44AD of the Act thereby justifying 8% rate of profit. But in the given case, the Assessing Officer, by its impugned order, has absolutely created new liability for the writ applicant and that too, contrary to the directions issued by the Appellate Tribunal. Therefore, HC are convinced that the impugned order passed by the Assessing Officer is not sustainable in law.
In the result, this writ application succeeds and is hereby allowed. The order passed by the Assessing Officer is hereby quashed and set aside. The matter is remitted to the Assessing Officer for fresh consideration of the issue as specifically directed by the Appellate Tribunal.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Rule returnable forthwith. Ms. Raval, the learned standing counsel appearing for the Revenue waives service of notice of rule for and on behalf of the Revenue.
2. By this writ application under article 226 of the Constitution of India, the writ applicant (assessee) has prayed for the following reliefs:
“(a) quash and set aside the impugned Assessment Order dated 27.12.2018 at Annexure ‘A’ to this petition;
(b) pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the Assessment Order dated 27.12.2018 at Annexure “A” to this petition;
(c) any other and further relief deemed just and proper be granted in the interest of justice;
(d) to provide for the cost of this petition.”
2. The facts giving rise to this writ application may be summarised as under:
2.1 The writ applicant seeks to challenge the order passed by the respondent under section 143(3) read with section 254 of the Income-tax Act, 1961 (for short, ‘the Act, 1961’) for the assessment year 2004-2005. The assessee is a company incorporated under the Companies Act, 1956. The assessee is in the business of construction. The return of the income for the year under consideration was filed on 1st November 2004 declaring total income at Rs. 11,16,785/- (Rupees Eleven Lakh Sixteen Thousand Seven Hundred Eighty Five only) and the same was processed under section 143(1) of the Act.
2.2 The case of the assessee came to be selected for scrutiny and various details were called for by the Assessing Officer. In such circumstances, the best judgment assessment came to be framed under section 144 of the Act vide order dated 8th December 2006 assessing the income of the assessee at Rs. 1,25,93,920/- (Rupees One Crore Twenty Five Lakh Ninety Three Thousand Nine Hundred Twenty only) in view of the provisions of section 44AD of the Act.
2.3 The writ applicant challenged the assessment order dated 8th December 2006 by preferring an appeal before the CIT (Appeals). The said appeal came to be dismissed by the CIT(Appeals) vide order dated 31st December 2007.
2.4 The writ applicant, thereafter, thought fit to carry the matter before the Income-tax Appellate Tribunal, but, by the time, the writ applicant could prefer the appeal, there was already delay of 329 days in filing such appeal. The Income-tax Appellate Tribunal declined to condone the delay. In such circumstances, the writ applicant came before this Court by filing the Tax Appeal No.1465 of 2011. The Tax Appeal No.1465 of 2011 came to be allowed by this Court vide order dated 11th December 2012 and the matter was remitted to the Appellate Tribunal. The order passed by this Court dated 11th December 2012 referred to above reads as under:
“1. Learned counsel Mr. Sudhir Mehta appears for the respondent in response to our notice of final disposal issued on 18.9.2012.
2. Assessee has challenged the decision of the Income Tax Appellate Tribunal dated 5.8.2011 by which the appeal of the present appellant came to be dismissed on the ground that there was delay of 329 days in filing the appeal and the assessee, despite several opportunities, had not filed any application explaining such delay and seeking condonation thereof.
3. Counsel for the appellant submitted that the assessee is engaged in the business of construction as Civil Contractor and persons responsible for the assessee company need to continuously travel in relation with their work, due to which, instructions could not be immediately supplied to the counsel for filing the application for condonation of delay. She submitted that before the Tribunal request was made for granting one more opportunity. However, the Tribunal, considering the passage of time, proceeded to dismiss the appeal only on the ground that there was delay in presenting the appeal and no condonation was sought.
4. Having perused the order of the Tribunal and having heard Counsel for the parties, we are of the opinion that the appellant, of course, subject to certain strict conditions, is required to be granted one last opportunity of filing application for condonation of delay before the Tribunal.
5. Under the circumstances, order of the Tribunal is reversed. Proceedings are placed back before the Tribunal to permit the appellant to file application for condonation of delay. This shall, however, be subject to following conditions that the appellant :-
(1) shall deposit sum of Rs. 5000/- with the Gujarat State Legal Services Authority latest by 31.12.2012;
(2) shall file appropriate application for condonation of delay before the Tribunal also latest by the said date.
Appeal is disposed of accordingly.”
2.5 The Appellate Tribunal partly allowed the appeal preferred by the writ applicant herein holding as under:
“6 We have carefully perused the contents of the application for condonation of delay along with the affidavit. In our considered opinion, the assessee prevented by reasonable and sufficient cause for not filing the appeal on time. Therefore, in the interest of Justice and fair play, the delay is condoned.
7. Coming to the merits of the case, we find that the assessment order was made ex parte u/s. 144 of the Act which was confirmed by the ld. CIT(A).
8. A perusal of the order of the authorities below shows that because of non-attendance by the assessee, the A.O. proceeded by applying rate of 8% following guidelines of section 44AD of the Act.
9. In our considered opinion and the understanding of the facts in issue, since E-return was accompanied with Audit Report u/s. 44AB of the Act provisions of section 44AD are not applicable.
10. Therefore, in the interest of justice, we deem it fit to restore the issue to the files of the A.O. The Assessee is directed to attend the assessment proceedings and justify its claim of lower rate of profit in accordance with its books of account. The A.O. is directed to verify the same and decide the issue afresh after giving a reasonable and fair opportunity of being heard to the assessee.
11. In the result, the appeal filed by the Assess is treated as allowed for statistical purpose.”
3. Thus, the Appellate Tribunal took into consideration the following:
[a] The assessment order was ex parte under section 144 of the Act.
[b] The authority ought not to have proceeded by applying the rate of 8% following the guidelines of section 44AD of the Act.
[c] As the return was accompanied with the audit report under section 44AB of the Act, the provisions of section 44AD would not be applicable.
4. In such circumstances referred to above, the Appellate Tribunal thought fit to direct the Assessing Officer to reconsider the claim of the assessee of lower rate of profit in accordance with its books of account. The direction issued by the Tribunal is very specific. The Tribunal directed the Assessing Officer to verify the claim of lower rate of profit and decide the issue a fresh after giving reasonable opportunity of hearing to the writ applicant.
5. On the matter being remitted to the Assessing Officer, the Assessing Officer appears to have travelled beyond the scope of the issue on which the Tribunal remitted the matter. In the fresh assessment order, the Assessing Officer held as under:
“12 After discussion and on the basis of the data made available on record, the total income of the assessee for the year under consideration is assessed as under:
Computation of income
