IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B , MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA No.7791/Mum/2012 (Assessment Year 1996-97) Nahira Cosmetic Enterprises Pvt. Ltd., 7, Lalwani Indl. Estate, 14, Katrak Road, P.O.Box 7117, Wadala, Mumbai 400 020 PAN: AAACN 0267D ...... Appellant Vs. Dy. Commissioner of Income Tax, Circle 7(1), Aaykar Bhavan,M.K.Road, Mumbai 400020 .... Respondent Assessee by : Shri Shekhar Gupta Revenue by : Shri B.Satyanarayana Raju Date of hearing : 13/10/2016 Date of pronouncement : 19/10/2016 ORDER PER G.S.PANNU,A.M: captioned appeal filed by assessee pertaining to assessment year 1996-97 is directed against order passed by CIT(A)-12, Mumbai dated 12/11/2012 which in turn arises out of order passed by Assessing Officer under section 143(3) r.w.s. 147 of Income Tax Act, 1961 (in short Act ) dated 26/03/2004. 2. In this appeal, assessee has raised following Grounds of appeal:- 2 ITA No.7791/Mum/2012 (Assessment Year 1996-97) 1. learned CIT (Appeals) has erred in law and on facts of case in sustaining order of assessing officer reopening assessment u/s.147 of Income Tax Act. 2. learned CIT (Appeals) has erred in law and on facts of case in sustaining order of assessing officer disallowing Rs.6,75,000/- paid to Triveni International Productions Pvt. Ltd. on account of advertising and sales promotion expenditure. 3. learned CIT (Appeals) has erred in law and on facts of case in sustaining order of assessing officer in disallowing interest for Rs.3,933/- paid to Triveni International Productions Pvt. Ltd.. 4. learned CIT (Appeals) has erred in law and on facts of case in sustaining order of assessing officer in disallowing sales commissions expenses Rs.4,31,978/- paid to Bahari & Co. Pvt. Ltd. 5. learned CIT (Appeals) has erred in law and on facts of case in sustaining order of assessing officer in disallowing conducting charges Rs.4,61,230/- paid to Prahalad Mohan. 6. assessee company craves leave to add, alter or amend above grounds of appeal. 3. Although assessee has raised multiple Grounds of appeal, but first and foremost grievance is with regard to validity of proceedings initiated by issuance of notice under section 147/148 of Act. brief facts, in relation to said issue are summarized as follows. appellant before us is company incorporated under provisions of Companies Act, 1956 and for assessment year 1996-97 it filed return of income on 28/11/1996 declaring income of Rs.26,240/-. Subsequently, assessment under section 143(3) of Act was completed on 25/5/1998 assessing total income at Rs.5,59,166/-, wherein only addition made was on account of disallowance of Sales Tax of earlier years of Rs.5,30,922/-. Subsequently, notice under section 148 was issued on 23/03/2003 reopening assessment on ground that certain income chargeable to tax had escaped assessment. In ensuring assessment finalized under section 143(3) r.w.s. 148 of Act 3 ITA No.7791/Mum/2012 (Assessment Year 1996-97) dated 26/3/2004, total income has been determined at Rs.22,28,191/-, after making certain additions/disallowances. Apart from challenging additions before CIT(A), assessee had raised Additional Ground of appeal contending that case of assessee could not be reopened under section 147/148 of Act and that Assessing Officer erred in reopening assessment on basis of loose papers, which were in-fact found in course of search proceedings in case of sister concern, i.e. Magna Publishing Co. Ltd. In this context, relevant facts are that search and seizure action was undertaken by Department under section 132(1) of Act on 11/2/2000 in case of Magna Publishing Co. Ltd. sister concern of assessee company , whereas case of assessee was covered by survey conducted under section 133A of Act simultaneously on 11/2/2000. order of CIT(A) reveals that initiation of proceedings under section 147/148 of Act was sought to be challenged by assessee as Additional Ground of appeal on various points. CIT(A) has discussed issue in detail from paras 2.2 to 3.4 of his order and it is concluded that Additional Ground of appeal being raised by assessee was afterthought and it has been further held that assessee could not establish case at all. In this background, assessee is in further appeal before us. 4. Before us, Ld. Representative for assessee has made varied submissions on aspect of validity of proceedings initiated under section 147/148 of Act. One pertinent point raised by assessee is that reassessment in present case has been sought to be made by issuance of notice under section 148 of Act beyond period four years from end of relevant assessment year and in that view of matter, conditions prescribed in first proviso to section 147 of Act are required to be 4 ITA No.7791/Mum/2012 (Assessment Year 1996-97) complied with; and that, in present case, reasons recorded by Assessing Officer do not contain any averment that conditions prescribed in first proviso to section 147 of Act are fulfilled. In support, reliance has been placed on judgment of Hon'ble Bombay High Court in case of DIL Ltd. vs. ACIT, 343 ITR 296(Bom). 4.1 In order to appreciate aforesaid plea, we may refer to reasons recorded by Assessing Officer, which are placed at page 24 of Paper Book, and which read as under:- Survey u/s. 133A was conducted on assessee s office premises on11.2.2000. During course of survey, evidence was found that payment of Rs.6.75 lakhs to M/s. Triveni International Productions P. Ltd. for making of corporate film, was bogus. Therefore, income has been under assessed by Rs.6.75 lakhs. 4.2 Admittedly, in present case, reopening of assessment is by way of notice under section 148 of Act dated 23/03/2003, which is beyond period of four years from end of relevant assessment year. It is also emerging from record that original return of income filed by assessee was subject to scrutiny assessment under section 143(3) of Act dated 25/5/1998, wherein total income of assessee was computed at Rs. Rs.5,59,166/- first proviso to section 147 of Act provides that in case, reopening of assessment is beyond period of 4 years, proceedings can be validly reopened only incase income chargeable to tax has escaped assessment by reason of failure on part of assessee to disclose fully and truly all material facts necessary for its assessment. In present case, plea of assessee is that reasons recorded do not contain any statement to effect that assessee has failed to disclose fully and truly all material facts necessary for assessment. aforesaid plea of assessee is quite potent considering reasons recorded, which have been reproduced 5 ITA No.7791/Mum/2012 (Assessment Year 1996-97) above and also in light of judgment of Hon'ble Bombay High Court in case of DIL Ltd.(supra). 5. Ld. Departmental Representative contended that plea of invalidity of reassessment proceedings has been belatedly raised by assessee before CIT(A) at stage when assessee s petition was dismissed by Income Tax Settlement Commission also. 6. We have carefully considered objection raised by Ld. Departmental Representative on belated raising of such Ground before CIT(A). In fact, CIT(A) has also taken note of same and accordingly to him, raising of Ground challenging validity of initiation of proceedings under section 147/148 of Act was afterthought and thus, he did not admit same. aforesaid objection of Revenue, in our view, is quite misplaced. Ostensibly, plea raised by assessee challenging validity of initiation of proceedings under section 147/148 of Act involves point of law and it is also clear that facts relevant to decide same are emerging from record. It is well settled legal proposition that assessee is entitled to raise fresh plea in appeal proceedings so long as, such fresh claim is bonafide and involve point of law on which no fresh facts are required to be investigated. In context of said proposition, Ld. Representative for assessee had relied upon following decisions:- (1) Nirmala L. Mehta vs. CIT, 269 ITR 2(Bom) (2) Smt. Raj Rani Gulati vs. CIT, 346 ITR 543 (All) (3) CIT vs. St. Mary s Malankara Seminary, 348 ITR 69 (Ker) (4) CIT vs. Pruthvi Brokers and Shareholders P. Ltd., 349 ITR 336 (Bom) 6 ITA No.7791/Mum/2012 (Assessment Year 1996-97) 6.1 only objection raised by Revenue is that omission to raise such plea before Assessing Officer and even at time of initial filing of appeal before CIT(A) was deliberate and that it was raised in course of proceedings before CIT(A) as afterthought. CIT(A) further notes that assessee had approached Settlement Commission admitting concealment of income for instant assessment year but plea of assessee was rejected and only after that assessee raised issue of validity of proceedings under section 147/148 of Act before CIT(A). In our considered opinion, case of assessee cannot be shut out merely because fresh plea has been raised in course of proceedings before CIT(A) and not at time of filing appeal before CIT(A). Quite clearly, plea of assessee is based on validity of reasons recorded by Assessing Officer, which were recorded by Assessing Officer before issuance of notice under section 148 of Act. Quite clearly, factum of assessee s application being rejected by Settlement Commission or that ground was not raised at time of filing of appeal before CIT(A) do not turn much so far as validity of reasons recorded for issuance of notice under section 148 of Act are concerned. There is neither any material and nor it has been established by Revenue that omission to raise such Ground earlier was deliberate or malafide. Under these circumstances, in our view, point being raised by assessee regarding validity of initiation of proceedings under section 147/148 of Act deserves to be admitted for adjudication. In course of hearing, aforesaid was put across to Ld. Departmental Representative and it was specifically required from him to justify initiation of proceedings under section 147/148 of Act in present case in light of judgment of Hon'ble Bombay 7 ITA No.7791/Mum/2012 (Assessment Year 1996-97) High Court in case of DIL Ltd. (supra). No specific credible argument has been raised in this regard. 6.2 In our considered opinion, in present case, reasons recorded for reopening assessment do not contain any charge against assessee that there has been any failure on its part to fully and truly disclose all material facts necessary for assessment. aforesaid is primary requirement contained in first proviso to section 147 of Act and since same has not been fulfilled, basis on which reopening of assessment was sought to be effected by Assessing Officer, deserves to be treated as untenable in eyes of law, considering judgment of Hon'ble Bombay High Court in case of DIL(supra). 6.3 In view of aforesaid discussion, we hold that proceeding initiated by issuance of notice under section 148 of Act dated 23/3/2003 is contrary to law and is hereby set-aside. As consequence, assessment framed thereafter is liable to be quashed, we hold so. 6.4 Since we have quashed assessment based on above plea of assessee, other arguments raised by assessee in relation to merits of additions are rendered academic and are not being addressed. 7. Resultantly, appeal of assessee is allowed, as above. Order pronounced in open court on 19/10/2016 Sd/- Sd/- (AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER Mumbai, Dated 19/10/2016 Vm, Sr. PS 8 ITA No.7791/Mum/2012 (Assessment Year 1996-97) Copy of Order forwarded to : 1. Appellant , 2. Respondent. 3. CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Nahira Cosmetic Enterprises Pvt. Ltd. v. Dy. Commissioner of Income-tax, Circle – 7(1), Mumbai