High Court Of Gujarat
Sheth Construction Company vs. ITO
Section 254(1)
Asst. Year 1994-95
D.A. Mehta & Ms. H.N. Devani, JJ.
Tax Appeal No. 451 of 2004
30th December, 2004
Counsel Appeared
Manish J. Shah, for the Appellant : Mrs. M.M. Bhatt, for the Respondent
JUDGMENT
D.A. Mehta, J. :
This appeal is preferred by the assessee against the order dt. 1st May, 2003, made by the Tribunal, SMC Bench, Ahmedabad, in ITA No. 580/Ahd/2000. The appellant has proposed the following two questions stated to be substantial questions of law arising out of the aforesaid order of the Tribunal :
“(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in not sending the matter back to the CIT(A) to decide the issues on merits when, in fact, the CIT(A)’s order did not deal with the grounds on merits but allowed assessee’s appeal on a preliminary point ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the validity of the assessment order when the order sent to assessee was not signed by the AO ?”
At the outset Mr. Manish J. Shah, learned advocate for the appellant, states that he does not press question No. 2 as proposed and restricts his submissions in relation to question No. 1 only. Heard Mr. M.J. Shah, learned advocate for the appellant, and Mrs. M.M. Bhatt, learned standing counsel appearing on behalf of the respondent- Revenue.
The following substantial question of law arises for consideration :
Admit.
“Whether, on the facts and in the circumstances of the case, the Tribunal having reversed the order of the CIT(A) on preliminary point, was the Tribunal not required to restore the matter to the file of the CIT(A) for deciding other grounds on merits, which had not been decided by the CIT(A) in the first round ?” By consent of the learned advocates for the parties, the matter is taken up for final disposal.
The assessment year is 1994-95 and the relevant accounting period is financial year ended on 31st March, 1994. In the assessment framed on 16th Feb., 1995, the AO made addition on account of bad debts of Rs. 70,025 and on account of disallowance of interest payment of Rs. 6,580. The assessee carried the matter in appeal before CIT(A) challenging both the issues. When the matter came up for hearing before CIT(A), the appellant raised a preliminary objection in the following terms :
“The assessment order passed under s. 143(3) of the IT Act, 1961, and served to your appellant is not signed by learned AO. In the opinion of your appellant, assessment order served without signature of initial AO is null and void in view of what is held in following cases : (a) KalyanKumar Ray vs. CIT SLP Civil No. 11270 of 1991, dt. 6th Aug., 1999, (1992) 102 CTR (SC) 188 : (1992) 191 ITR 634 (SC) (b) Smt. Kilasho Devi Burman & Ors. vs. CIT (1996) 132 CTR (SC) 173 : (1996) 85 Taxman 346 (SC) (c) Sushil Chandra Ghose vs. ITO & Ors. (1959) 35 ITR 379 (Cal) (d) S. Mubarik Shah Naqshbandi vs. CIT 1977 CTR (J&K) 180 : (1977) 110 ITR 217 (J&K).”
The CIT(A) accepted the said preliminary objection and held that “I find that the assessment order is not signed by the AO and, therefore, such assessment orders are non-existent in the eyes of law. The order passed under s. 143(3) which is unsigned is, therefore, cancelled.” In this view of the matter, the original grounds of appeal which challenged the two additions were not dealt with by CIT(A).
The Revenue carried the matter in appeal before the Tribunal challenging the finding of CIT(A) that the assessment order was not signed by the AO. The Tribunal passed the impugned order on 1st May, 2003, after recording absence on part of the respondent-assessee and on the basis of photocopy of the assessment order filed along with the appeal papers, the Tribunal found at the first instance that the CIT(A) did not appear to be justified in striking down the assessment order in entirety; in the same breath the Tribunal records that when the matter was heard on 27th March, 2003, the assessee’s counsel had sought 2-3 days time to ascertain the facts and then appear. Accordingly, the case was adjourned to 31st March, 2003. The Tribunal records that on the said subsequent day neither the assessee’s counsel appeared nor any evidence to controvert the aforesaid factual aspect was furnished. Therefore, the Tribunal found that there was a valid assessment order which bore the signature of the AO at two different places, one at the end of the assessment order and one after the office note below the assessment order.
In these circumstances, the Departmental appeal came to be allowed and the order of the AO was restored.
The assessee-appellant moved a miscellaneous application in which it was stated that on the date of hearing, i.e., 27th March, 2003, the Tribunal directed the assessee’s counsel to obtain instructions in the matter in light of transfer application which was on file of the Tribunal and adjourned the matter to 31st March, 2003. It is averred in the miscellaneous application that the application was by some other firm having the same name i.e., M/s Sheth Construction Co. and in the application a request was made to transfer the file to Rajkot Bench of the Tribunal. When the counsel, after going through the application, submitted that the said application pertains to some other assessee, the Tribunal called upon the counsel to tender an application signed by the partners of the assessee-firm that the said application had not been moved by the assessee-firm, and that the hearing on merits of the matter would take place only after receipt of such application. It is further stated in the miscellaneous application that between 27th March, 2003 to 2nd April, 2003, as the partners of the assessee-firm were out of station, the application as directed by the Tribunal could not be prepared and submitted. Hence, the counsel did not appear on 31st March, 2003. In these circumstances, a prayer was made to recall the order of the Tribunal as the same was against the principles of natural justice.
The Tribunal, for the reasons stated in its order dt. 5th Jan., 2004, rejected the miscellaneous application by referring to what was recorded by it in its earlier order of 1st May, 2003. Mr. Manish J. Shah has, in the backdrop of the aforesaid facts, made a fervent plea to restore the matter to the Tribunal so as to enable the Tribunal to decide on merits, the controversy between the parties. Mr. Shah submitted that the assessee was seeking an opportunity of being heard on the two issues which were not decided by the appellate authorities. Mrs. M.M. Bhatt, learned standing counsel appearing on behalf of the respondent-Revenue, supported the order of the Tribunal and submitted that when the Department had filed appeal before the Tribunal, it was incumbent upon the assessee to have raised cross-objection challenging the decision of the CIT(A) to the extent the CIT(A) had failed to decide the original grounds of appeal. That the assessee having failed to do so, no second innings should be granted to the assessee.
The facts narrated hereinbefore are eloquent and need no repetition. It is apparent that the appellant-assessee had at no stage given up its right of appeal which is available under the statute. In fact, the appellant had challenged the addition and disallowance made by the AO on merits before the CIT(A). However, the CIT(A) having entertained the additional ground regarding validity of the assessment order and upheld the same holding the assessment order to be non-existent in eyes of law, there was no occasion for the assessee to file any cross- objection in the Revenue’s appeal before the Tribunal. The fact that the assessee had succeeded in entirety cannot be lost sight of and in the circumstances to expect the assessee to prefer cross-objection, may be an ideal situation, but if the said cross-objection was not preferred by the assessee, no fault can be found in the conduct of the assessee so as to disentitle the assessee from obtaining the decision on merits. Once the Tribunal had come to the conclusion that the assessment order had been signed by the AO and is valid in eyes of law, while reversing the order of the CIT(A) on this count, it was incumbent upon the Tribunal to restore the matter to the file of CIT(A). Possibly, the Tribunal lost sight of this fact due to absence of the counsel of the assessee and the misunderstanding on behalf of the counsel of the assessee in relation to the facts narrated in the miscellaneous application. Be that as it may.
In light of the circumstances and facts which have come on record, it is apparent that for the purposes of adjudication on merits of the controversy, the matter requires to be restored to the file of the CIT(A), as the Tribunal would also have to adopt the same course of action if the matter is restored to the file of the Tribunal. In the circumstances, without disturbing the finding recorded by the Tribunal as to validity of the assessment order, the matter is restored to the file of CIT(A) so as to enable the CIT(A) to decide the merits of the original grounds of appeal raised by the assessee before him.
Accordingly, the question is answered and it is held that the Tribunal ought to have restored the matter to the file of CIT(A) after having decided the preliminary issue against the assessee.
17. The appeal is allowed. There shall be no order as to costs.
[Citation : 274 ITR 304]
