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Income Tax Appellate Tribunal (ITAT) Delhi in a recent judgment while admitting additional ground followed the dictum laid by Supreme Court that  issues which are purely legal in nature, goes to the root of the matter and no new facts are required to be invoked should be admitted for adjudication being legal objection of the assessee.

Case Details:
ITA No. 2765/Del /2011, ITA No. 3703/Del /2011 ; Assessment Year:2007-08
CO No. 17/Del/2015; CO No. 18/Del/2015
M/s Vishu Impex Pvt. Ltd (Appellant) vs Income-tax Officer (Respondent)
Date of Order: 31-12-2015

Important Case Laws relied by ITAT :
National Thermal Power Company Ltd 229 ITR 383 (SC) and
Gedore Tools Pvt. Ltd reported in 238 ITR 268 (Del)

Brief facts of the Case:
Against the appeals filed by the Revenue against the order of CIT-A, the assessee filed cross objections challenging the validity of penalty orders u/s 271D and 271E on the ground of limitation. The assessee also filed application for condonation of delay in filing the cross objections. The assessee submitted that admission of additional ground sought to be taken by the assessee by way of cross objection be heard first to which revenue registered no objection.

Contentions of the assessee:
The assessee submitted that the ground in the cross objection was that the impugned orders passed u/s 271D & 271E of the Act were barred by limitation and since this issue was taken up for the first time before the ITAT in the nature of additional ground, therefore, the same be admitted for adjudication. The assessee place reliance on the judgment of the Supreme Court in the case of National Thermal Power Company Ltd reported in 229 ITR 383 submitting that the issue which is purely legal and which goes to the root of the matter and no new facts are required to be invoked, then the same should be admitted for adjudication being legal objection of the assessee. The assessee also placed reliance on the decision of the ITAT Delhi in the case of DCIT Vs. Silver Line passed in cross objection Nos. 122, 109, 107 & 108/Del/2012.

Contentions of the Revenue:
Revenue opposed the admission of the additional grounds stating that when the ground were not raised before the CIT(A), then the same could not be raised before the Tribunal by way of additional ground.

Held:
Additional grounds allowed.

Important Excerpt from ITAT Judgment:  

On care ful consideration of the above submissions, at the very outset, we note that the ITAT ‘G’ Bench Delhi in the case of DCIT Vs. Silver Line [supra] has elaborately considered the submissions of the assessee as well as of the Revenue on admission of additional ground raised by the assessee which was not raised before the first appellate authority and referring and following the dicta laiddown by the Hon'ble Apex Court, in the case of NTPC [supra] wherein it has been held as under:

6.1. Since the additional ground raised by the assessee firm, according to us, being a legal issue which goes to the root of the matter, we were of the view that it was paramount to take up this issue for adjudication before addressing the other issues raised by the rival parties in their respective appeals/ cross objections [supra].

6.2. The learned DR, on his part, by extensively quoting the provisions of s. 253(4) of the Act, argued that the assessee had failed to file a Memorandum of cross objection/additional ground against the any part of the CIT (A) within the time specified in sub-section (3) and, therefore, it cannot be acted upon now. He had, further, contended that whether a notice u/s 143(2) of the Act is issued or not was only a question of fact and not a question of law. It was also pointed out by the learned DR that the alleged non-issuance of a Notice u/s 143(2) of the Act was neither raised before the assessing officer or nor before the first appellate authority and, therefore, it was argued, a new case (issue) cannot now be raised before the Tribunal for the first time. In this connection, the learned DR had relied on the findings of the Tribunal in the case of Sandeep & Patel reported in 22 Taxman.com

288. It was the stand of the learned DR that no findings of the CIT (A) on the issue can be impugned. It was, further, argued that, even for argument sake, the issue raised by the assessee firm is purely a question of law; the same cannot be raised/taken up in a Cross Objection.

ITA Nos.1809, 1504, 1505 & 1506 /Del/ 2013 C.O. Nos.122, 109, 107 & 108 /Del/2013 6.3 Further, the learned D.R. has given a short written submission dated 06.08.2014 the content of the same is reproduced below:-

"Note on applicability of Delhi High Court judgment in Alpine Electronics Asia P Ltd. (341 ITR 247 Del) in CO No. 122/D/2013 in ITA 1809/D/2013 filed by Silverline for AY 2008-09 Before discussing as to how the facts of the Delhi High Court judgment in Alpine Electronics Asia Pvt. Ltd. ( 341 ITR 247 Del) are distinguishable it will be relevant to keep in mind the provisions of section 292BB of the Income Tax Act, 1961 which provide that after 31-04-2008 in a ease where assessee has appeared or cooperated in any inquiry relating to assessment or reassessment, he after the completion of the assessment/reassessment cannot question the notice service of any notice on the following grounds;

(a) that notice has not been served; or
(b) that notice has not been served in time; or
(e) that notice has been served upon him in an improper manner

1.2 In the case before the High Court (as seen from para 26 of the Order), assessment proceedings had not got completed (only a draft order was proposed) by the time when service of notice u/s 143(2)(ii) was challenged before the High Court by way of Writ Petition. Since, the challenge has been there before the completion of the assessment or reassessment proceedings the High Court in para 28 held that benefit of saving as provided u/s 292BB is not available to Revenue and hence Writ of Certiorari was issued quashing the assessment proceedings.

02. In so far as the facts of the CO filed by assessee Silverline (AY 08-09) are concerned it would be relevant to take note that Notice u/s 148 was issued on 28-03-2011 and thereafter taking note of the compliance or non compliance made by the assessee, AO finalized the assessment proceedings on 28-12-2011. It may kindly be noted that till the conclusion of assessment proceedings validity or service of notice has not at all been questioned ill any manner.

03. From the above facts it is clear that since the assessee did not challenge at all the service of notice till the conclusion of the assessment proceedings by virtue of provisions of section 292BB the assessee is estopped from challenging the reassessment proceedings on account of non-service or improper service or non- service in time of notice u/s 143(2) of the Act.

04. From the above, it is clear that reliance placed by the Cc-Object on Delhi High Court judgment on Alpine Electronics Asia Pvt. Ltd. (341 ITR 247 Del) is misplaced and it on the contrary is in favour of Revenue. On this ground itself COs filed by the assessee Silverline ITA Nos.1809, 1504, 1505 & 1506 /Del/ 2013 C.O. Nos.122, 109, 107 & 108 /Del/2013 need to be dismissed with costs."

6.4. On the other hand, the learned AR submitted that during the course of reassessment proceedings, no notice u/s 143(2) of the Act was issued. To strengthen his argument, he had cited the re-assessment order dated 28.12.2011 [Para 3 for the AY 2005-06] and also produced a copy of the order-sheet obtained from the assessing authority [source: P 88 of PB-I]. According to the learned AR, the assessing authority had admitted also in response to a query under RTI Act that no notice u/s 143(2) of the Act was issued. Rebutting the learned DR's argument that the additional ground raised in Cross Objection cannot be acted upon in lieu of s. 253(4) of the Act, the learned AR had placed strong reliance on the judgment of the Hon'ble Gauhati High Court reported in 234 ITR 663 (Gau). The issue raised in the additional ground being a legal which goes to the rootof the matter, the learned AR contended that there was no difference between a cross objection and an appeal and, therefore, the additional ground raised by the assessee deserves to be admitted as it is within the parameter of law. It was, further, submitted that it was an undisputed fact that in the absence of a notice u/s 143(2) of the Act, whether the assessment prevails or not, is purely a legal issue. In this connection, the learned AR drew strength from the findings of the earlier Bench of this Tribunal in ITA No. 6020/Del/2012 dated 29.5.2014 in the case of B.R.Arora v. ACIT.

6.5 Further, it was submitted by the learned counsel that Section 292BB is applicable only from A.Y. 2008-09 onward in light of dictum laid down by the Hon'ble Special Bench of the

Tribunal in case of Kuber Tabacco Products (Pvt.) Ltd. reported in 117 ITD 273 (Delhi) (S.B), which was affirmed by the Hon'ble Delhi H.C. by judgment dated 06.10.2010 in Writ Petition No. 1159 & 1161/2010. It was submitted further that when no notice u/s 143(2) is issued. Section 292BB does not have any application. For above proportion, the learned AR relied on the following case laws:

(i) Manish Gupta 259 CTR 57 (All.) H.C.
    
(ii) Parikalpana Estate Development (P) Ltd. 79 DTR 241 (All.)

6.6 In conclusion, it was contended that non-issuance of a notice u/s 143(2) of the Act, the assessment concluded u/s 147 of the Act becomes invalid. For this proposition, the learned AR had placed strong reliance on the following case laws, namely:

(i) B.R.Arora v. ACIT in ITA No.6020/D/2012 dated 29.5.2014 –ITAT, Delhi 'A' Bench;
   
(ii) Alpine Electronics Asia Pte Ltd v. DGIT & Ors. (2012) 341 ITR 247 (Del);
   
(iii) ITO v. D.D. Ahuja & Brothers - 158 TTJ (Lucknow) 54;
    (iv) Sapthagiri Finance and Investments v. ITO (2013) 90 DTR 289 (Mad);
    (v) Rajkumar Chawla 94 ITD 1 (Del) (SB);
    (vi) CIT v. K.M.Ravji (Tax Appl No.771/2012, Order dt. 18.7.2011 - Guj HC);
    (vii) CIT v. Panorama Builders Pvt. Ltd (Tax Appl.No.435/2011 order dt. 30.8.2012)

6.7. The learned D.R., in reply filed a written submission dated 22.09.2014. The gist of same read as follows:-

"A Note on applicability of decisions/judgments relied by the assessee

1. The assessee has basically placed reliance on the following judgments/decisions:-

(i) Manish Gupta 259 CTR 57 All HC:
    (ii) Parikalpana Estate 79 DTR 246) & P&H HC:
    (iii) Kuber Tobacco Products P Ltd. Delhi HC 06.10.2010:

2.1 Before dealing with the applicability of the aforesaid judgments which hover around the provisions of section 143(2), 292BB in the context of issuance of the notice and service thereof etc. It is pointed out that all these provisions as contained in the Income Tax Act or the Income Tax Rules talk about the 'service of the notice' alone obviously become upon service issuance is implicit. That is why, the law also as contained u/s 143(2) etc. does not provide for the factum of issuance of the notice to be proved but just talk about the service of the notice. Further, law does not provide that notice intended to be served should necessarily be issued in writing or in a particular form (format). 2.2 Since the emphasis qua notice referred u/s 143(2) or 142(1) etc. is on 'service', section 292BB too talk about 'service' and not on the issuance. That is, to make the provisions of the Income Tax Act, 1961 really workable emphasis is on the service of the notice and not beyond. Reading the word issuance' u/s 292BBwhich law does not talk so would only tantamount to keeping oneself busy in writing the law which is the exclusive domain of the legislature and not of the Courts.

2.3 What fun would it make when the notice so issued is not even served. Kindly appreciate without service the assessee cannot be legally expected to appear in the proceedings for which service of the relevant notice is a must. How an assessee can participate in the proceedings without there being any ITA Nos.1809, 1504, 1505 & 1506 /Del/ 2013 C.O. Nos.122, 109, 107& 108 /Del/2013 notice (written or oral). Upon participation in the proceedings one can conclude that there was notice about which assessee had the knowledge. 2.4 Since, the Income Tax Act is silent for obvious reasons which even lay person (as shown above) can appreciate about the crucial aspect of the 'issuance of notice or the form (whether written or oral) in which it is to be served we have to form understanding with the help of other sources like Dictionaries which define the 'Notice' to mean information, knowledge of the existence of a fact or to apprise a person of some proceeding in which his interest are involved. Black's Law Dictionary (5th Edition) provides 'a person has notice of a fact if he knows the fact' and that it can be in many ways like implied, constructive etc. When seen in the context of the present case undisputed service of notice u/s 148 and thereafter participation of the assessee in assessment goes to show that it had the notice of the proceedings. 2.5 It is requested to kindly appreciate that section 292BB, 142(1), 143(2) are part of the machinery provided under the Income Tax Act to ascertain the correctness of the disclosures made in the return of income. That is, section 292BB is just a procedural provision unlike the charging sections which have intimate connection with the taxation of income per se just at the time of its accrual, arisal or receipt (and not mere quantum). Since, these are merely procedural provisions, they will apply to procedures which are initiated on or after the particular date from which it is brought on the statute which in this case was 01.04.2008.

2.6 As mentioned in this particular case the procedure of reassessment started with the service of notice u/s 148 (served on 28.03.2011) by which time amendment on the statute has already become effective. Accordingly, the procedural provisions of section 292BB which provide that there cannot be challenges like that notice has not been served; or that notice has not been served in time; or that notice has been served upon him in an improper manner once it is not agitated in the proceedings, will disable the assessee from impugning the notice u/s 143(2) in any manner that too at a belated stage before the Tribunal because of its participation in the proceedings without challenge as mandated in the laws.

2.7. In short, it is pointed out that law as contained u/s 143(2) etc. does not provide that notice intended to be issued has to be necessarily in writing or in a particular proforma. Participation

in the proceedings is undisputedly the best evidence to prove issuance or service of the notice that is why section 292BB taking note of this crucial aspect post participation has disabled the participants from challenging the frivolous grounds of non service of the notice. Service of the written notice issued u/s148 and subsequent participation in the proceedings has to be taken conclusive of service notice which, implicitly include issuance too. In other words, undisputed service of notice u/s 148 and thereafter participation of the assessee in assessment proceedings goes to show that it had the notice of the proceedings.

3. About the date as to from which particular date or assessment year section 292BB (inserted w.e.f. 01.04.2008) would be applicable, it may kindly be ITA Nos.1809, 1504, 1505 & 1506 /Del/ 2013 C.O. Nos.122, 109, 107 & 108 /Del/2013 appreciated that Finance Act is always for the financial year for which budget is being laid before the Parliament. It is why, Finance Act is generally in the context of the income which has been earned on which likely revenue realization can be worked out as such except where it is specifically provided as to form which particular date that will apply. But this has no relation with the procedural provisions which would apply with effect from the date from which it is inserted on the statute book dealing with the procedures taking place on that date or thereafter.

4. Thus, the interpretation that law requires issuance of notice deserves to be rejected.

5.0 In the light of the aforesaid submission alone it would become clear that none of the decisions referred to in para 1 above are applicable. Though in view of the discussion made above it is clear that all the three judgments referred to above do not need further submissions yet for the sake of further clarity qua the inapplicability these are being dealt with in the following paragraph 5.1 to 5.3.

5.1 In so far as Delhi High Court judgment in Kuber Tobacco Products P Ltd. Delhi HC 06.10.2010 is concerned it is humbly submitted that this does not help the cause of the appellant assessee. Before elaborating this aspect further, it will be relevant to note as to what the High Court has held which is as under: "In our view ITAT rightly held that 292BB is not retrospective as it creates disability by precluding assessee from taking a plea which otherwise could be taken as a matter of right. We hold that 292BB is applicable to AY 08-09 & later years."

Kindly note Law as contained u/s 292BB does not provides that it will apply for assessment year 08-09 and later years. Further, it may kindly appreciated that the issue as to from which assessment year the amendment will become applicable was not under consideration before the High Court. When it is so clearly the observations of the High Court "We hold that section 292BB is applicable to AY 08-09 and later years" are just obiter dictum. Even without these words the judgment of the High Court would have remained the same which further proves that above were just 'by the way remarks' and not the ratio which is a must for applying any High Court judgment. In this context, attention is invited to the Supreme Court judgment in Rekha Mukherjee v. Ashok Kumar Das {(2005) 3 SCC 427, 440-41 (para 29)} where it was held that the Court is bound by the ratio decidendi and not by mere observation. Very clearly thus judgment of the High Court does not help the appellant.

5.2 In so far as the Allahabad High Court judgment in the case of Manish Gupta {259 CTR 57 All HC} is concerned it is submitted that it proceeded on the assumption that law mandates issuance of the notice whereas as a matter of fact (demonstrated above) the law does not lay emphasis on issuance at all. 5.3 Likewise the Punjab and High Court judgment in Parikalpana E-state 79 DTR 246) also proceeds on the assumption that law mandates issuance of the notice whereas (as demonstrated above) law does not lay emphasis on ITA Nos.1809, 1504, 1505 & 1506 /Del/ 2013 C.O. Nos.122, 109, 107 & 108 /Del/2013 issuance and instead lays stres s on 'service' of the notice. Thus, this too is not applicable.

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Admission of additional grounds purely legal in nature, going to the root of matter and requiring no new facts should be accepted for adjudication-ITAT | 03-01-2016 |

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