Case Law Details

Case Name : Raymold Lighting Pvt. Ltd. Vs ITO (ITAT Chennai)
Appeal Number : ITA No. 412/Chny/2020
Date of Judgement/Order : 13/09/2022
Related Assessment Year : 2011-12

Raymold Lighting Pvt. Ltd. Vs ITO (ITAT Chennai)

ITAT noted that this appeal is against the rectification order passed by A.O and the impugned order by CIT(A) on this order of rectification u/s. 154 of the Act dated 27.09.2017. We noted that in the original appeal filed before CIT(A) by the assessee, the assessee has withdrawn his appeal, wherein the grounds was raised on merits i.e., challenging the reopening the assessment and validity of assessment order passed u/s. 143(3) of the Act. The CIT(A) in the impugned order has reproduced the grounds which clearly shows that the assessee want to re-argue the matter but u/s. 154 of the Act. We noted that the limitation prescribed u/s. 154 of the Act is that the mistake can be rectified which is apparent from record and no legal issue or factual issue on merits can be argued or re-argued particularly when the issue is highly debatable. Hence, we cannot entertain this appeal on this short point that this issue being highly debatable as raised before CIT(A). Thus, we dismiss the appeal of the assessee.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-3, Chennai in ITA No.177/CIT(A)-3/2018-19 dated 16.12.2019 for Assessment Year 2011-12.

2. The assessee raised the following grounds of appeal:

1. That the order of the learned CIT(A) dismissing the appeal is contrary to law, erroneous, illegal and unsustainable.

2. That the learned CIT(A) ought to have decided several issues that were agitated and canvassed before him on merits by evaluating evidence adduced in respect of all contentions issues.

3. That the learned CIT(A) erred in not examining the grounds and the material facts relating to the assessment, in an objective manner.

4. That the learned CIT(A) ought not to have failed to adjudicate a number of issues pertaining to assessment, arrayed in the grounds before him, including the validity of the order passed u/s 143(3) which is void abinitio.

5. That the learned Assessing Officer ought to have followed the procedure prescribed by the Apex Court in various judicial pronouncements when completing an assessment reopened u/s 148 of the Act.

6. That the learned CIT(A) ought to have excluded the capital gains arising on transfer of shares, the dividend where of is exempt u/s 10(38) following the decision of the Apex Court in Apollo Tyres while computing Book Profits u/s 115JB of the Act.

7. In any event, the order of the learned CIT(A) is untenable on facts as well as on law.

3. The brief facts of the case are that the original assessment was framed by Dy. Commissioner of Income Tax, Corporate Circle-5(1), Chennai for the Assessment Year 2011-12 u/s. 143(3) r/w s. 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’) vide his order dated 23.12.2016. In this assessment, the A.O assessed the capital gains from sale of shares and made computation as under:

3. During the year, the assessee claimed sale of shares of M/s Asian Electronics @ Rs.105 per share and offered Long Term Capital Gain of Rs.3,34,56,225/-. The assessee was required to furnish proof for the cost of acquisition claimed of Rs.35,43,750/- on Long Term Capital Gain offered. So far no proof/ details have been furnished by the assessee. As the assessee has failed to furnish any details / evidence regarding the cost of acquisition of shares, the deduction claimed on cost of acquisition of shares is disallowed and the Long Term Capital Gain is recomputed 35 under:-

Computation of total income

i) Income/Loss from business /profession (-) Rs. 66,27,241

ii) Income under capital gains sale consideration 3,70,00,000

Less: Cost of acquisition Rs. 0

…………………………………………………..

(As discussed in Para 3 above)

Long Term capital Gain  Rs. 3,70,00,000/-

iii) Income from other sources

Interest income Rs. 73,390

…………………………………………………..

TOTAL INCOME                             Rs. 3,04,46,149

…………………………………………………..

4. The assessee challenged this assessment before the CIT(A) and the CIT(A) in ITA No.200/CIT(A)-3/2016-17 dated 24.08.2017 passed an order as under:

“2. The case was heard on 21/06/2017, Shri Rajeev, CA, attended the hearing and explained the grounds of appeal. He requested a short adjournment as petition u/s 154 was pending before AO. Case was adjourned to 29/06/2017. Vide letter dated 05/08/2017, the appellant submitted that the rectification petition has been processed and rectification order was issued by the AO quashing the original demand which had already been paid and that the balance I demand of Rs.34,780/- being interest raised by the AO was also paid. Hence, the/ ‘ appellant submitted that they would like to withdraw the appeal and request to close the case. In view of the above, appellant is allowed to withdraw appeal.

3. In the result, the appeal is dismissed as withdrawn.”

5. The CIT(A) dismissed this appeal on the request of the assessee that the rectification petition u/s. 154 of the Act of the assessee has been processed and rectification order was issued by the A.O quashing the original demand. The appeal against original assessment order framed u/s. 143(3) r/w s. 147 of the Act dated 23.12.2016 was withdrawn by the assessee and accordingly, CIT(A) dismissed the same as withdrawn. The assessee moved rectification and the A.O passed rectification order and rectified the assessee’s order vide order dated 27.09.2017 as under:

“It has been brought to my notice by application date 27/09/2017 that the following mistake has occurred in the intimation dated 20/07/2017 u/s. 154 of the Income Tax Act, 1961 which is apparent from record. The exemption u/s. 10 amounting to Rs. 70,69,419 deducted from book profit represents LTCG exempted u/s. 10(38). As per section 115JB, income exempted u/s. 10(36) is not an allowable deduction for arriving at the book profit. It this is considered, the book profit u/s. 115JB would be Rs. 3,37,12,948 instead of Rs. 2,66,43,529/-. Rectify now. Upon considering the submission and examining the records, total income and demand are rectified as under.”

6. The assessee moved order against the rectification order passed by A.O u/s. 154 of the Act before CIT(A) and CIT(A) in the impugned order in ITA No.177/CIT(A)-3/2018-19 dated 16.12.2019 dismissed the appeal by observing in para 5 & 6 as under:

“5. I have considered carefully, the rectification order passed u/s 154 by the assessing officer and written submissions made by the appellant. I have also perused the remand report furnished by the assessing officer and rejoinder to the same filed by the appellant. In this case, the re­assessment was completed u/s 143(3) r.w.s 147 on 23.12.2016 determining the total income at Rs.3,04,46,149/-. Thereafter, the assessing officer vide order dated 27.09.2017 has rectified the assessment order, whereby, the book profit u/s 115JB has been adopted at Rs.3,37,12,948/- instead of 2,66,43,529/-. The assessed income is taken as Rs.3,04,46,150/-. The present appeal is against the order passed u/s 154 of the Incometax Act 1961 dated 27.09.2017.

6. While the appeal is filed against the order passed u/s 154 of the Incometax Act 1961 on 27.09.2017, in the grounds of appeal taken, the appellant has challenged the assessment order passed u/s 143(3) r.w.s 147 on 23.12.2016 on the issue of legality by raising the ground that the notice issued u/s 143(2) of the Incometax Act 1961 was not served on the assessee, therefore the said re-assessment order becomes invalid. The appellant in the appeal filed against the order passed u/s 154 cannot challenge the legality of proceedings completed u/s 143(3) r.w.s 147 on 23.12.2016. The appeal filed is not maintainable as per law. In any case, on remand, the assessing officer in the report furnished has categorically stated that the notice issued u/s 148 on 23.10.2015 was served on the appellant on 26.10.2015. It is further stated by the assessing officer that notice issued u/s 143(2) dated 12.08.2016 was also served on the appellant on 19.08.2016. The assessing officer has further clarified that the reasons for reopening the impugned assessment were duly furnished to the appellant on 29,08.2016. As regards to rectification order passed u/s 154, a notice for hearing on 26.09.2017 was sent to the appellant. In the absence of any response, the order u/s 154 was passed on 27.09.2017. The assessing officer also takes support from the provisions contained in section 292B of the incometax Act 1961 to say that the impugned proceedings shall not be invalidated merely by reason of any mistake or defect or omission in issue of any such notices, if the same is in substance and effect in conformity with or according to the intend and purpose of this Act, Therefore, on due consideration of the factual report submitted by the assessing officer, the grounds taken by the appellant deserves to be dismissed. The rectification order completed u/s 154 on 27.09.2016 determining the total income at Rs.3,04,46,149/-stands confirmed.”

7. We have noticed that none is present, despite service of notice to the assessee and hence, this appeal was heard exparte qua the assessee.

8. The Ld. Sr. DR supported the orders of the CIT(A) and that of the AO. He stated that these issues were raised by the assessee before CIT(A) i.e., validity of assessment order u/s. 143(3) as well as reopening of assessment u/s. 148 of the Act and which has been withdrawn by the assessee and CIT(A) has dismissed the appeal as withdrawn vide order in ITA No.200/CIT(A)-3/2016-17 dated 24.08.2017. Now the assessee cannot argue the matter while acting u/s. 154 of the Act. The Section 154 of the Act meant for mistake apparent from record and it cannot be treated as a regular appeal.

Hence, he requested that the appeal of the assessee deserved to be dismissed as not maintainable.

9. We have heard Ld Sr. DR and gone through the facts and circumstances of the case. We noted that this appeal is against the rectification order passed by A.O and the impugned order by CIT(A) on this order of rectification u/s. 154 of the Act dated 27.09.2017. We noted that in the original appeal filed before CIT(A) by the assessee, the assessee has withdrawn his appeal, wherein the grounds was raised on merits i.e., challenging the reopening the assessment and validity of assessment order passed u/s. 143(3) of the Act. The CIT(A) in the impugned order has reproduced the grounds which clearly shows that the assessee want to re-argue the matter but u/s. 154 of the Act. We noted that the limitation prescribed u/s. 154 of the Act is that the mistake can be rectified which is apparent from record and no legal issue or factual issue on merits can be argued or re-argued particularly when the issue is highly debatable. Hence, we cannot entertain this appeal on this short point that this issue being highly debatable as raised before CIT(A). Thus, we dismiss the appeal of the assessee.

10. In the result, the appeal of the assessee is dismissed.

Order pronounced in the Open Court on 13th September, 2022.

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