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Income Tax Appellate Tribunal, Hyderabad ‘B‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA-IT No.71/Hyd/2022 Assessment Year: 2017-18 Shri Venkateswara Rao Vs. Asstt. Director of Income Ponnuru, Hyderabad Tax (International PAN:AAWPP7203L Taxation)-2 Hyderabad (Appellant) (Respondent) Assessee by: Shri Y.V. Bhanu Narayan Rao, CA Revenue by: Shri Jeevan Lal Lavidiya, CIT (DR) Date of hearing: 16/03/2023 Date of pronouncement: 10/04/2023 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 15.2.2022 passed by the Assessing Officer u/s 147 r.w.s. 144C(13) of the I.T. Act, relating to A.Y.2017-18.
Facts of the case, in brief, are that the assessee is a non-resident and practicing Anesthesiologist based in Kuwait. He filed his return of income for A.Y 2017-18 on 30.03.2018 declaring total income at Rs.36,11,450/-. The return of income was processed u/s 143(1) of the Act.
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The Assessing Officer observed that as per information available with him, the assessee has made huge cash deposit of Rs.60.00 lakhs in his Bank A/c maintained with Axis Bank Current A/c No916020042516778), Himayat Nagar Branch during the A.Y 2017-18. Since the assessee has declared his income at Rs.36,21,770/- and has not declared the cash amount of Rs.60.00 lakhs deposited in the Bank A/c, the Assessing Officer invoked the provisions of section 147 of the I.T. Act by recording the following reasons given in the notice issued u/s 143(2) and accordingly reopened the assessment after obtaining necessary approval from the Add. CIT (International Taxation)-2 Hyderabad: “As per the information available with this office, the assessee has made a huge cash deposit of Rs. 60,00,000/- in his bank account maintained with Axis Bank (Current Account # 916020042516778) Himayath Nagar Branch during AY 2017-18. In the ITR for AY 2017-18, the assessee has declared his total income as Rs. 36,21,770. The cash deposits made by the assessee during AY 2017-18 is Rs. 60,00,000. Therefore, the cash deposit is far in excess of the sources of income declared by the assessee. The return of income was only processed u/s. 143(1) of . the I.T Act 1961. As the case has never been taken up for scrutiny, there is an under assessment of income to the extent of Rs. 60,00,000.”
4. The Assessing Officer issued notice u/s 148 of the Act dated 4.3.2020 and the assessee in response to the said notice issued u/s 148 of the Act filed his return of income on 14.3.2020 declaring income of Rs.36,21,770/- which was the income declared originally. The Assessing Officer, thereafter, issued statutory notices u/s 143(2) on 4.11.2020 and also communicated the reasons for reopening of the case.
5. The assessee vide letter dated 6.11.2020 filed objections for reopening of the assessment. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and disposed off the objection by passing a Page 2 of 20
ITA 71 of 2022 Venkateswara Rao Ponnuru speaking order. The assessee also challenged the validity of the notice issued u/s 143(2) which was rejected by the Assessing Officer. The assessee further raised various objections, such as the notice u/s 143(2) was served without considering the contents of the assessee’s letter and reasons recorded were not given within the reasonable time, that the case was originally selected for compulsory scrutiny etc., which were rejected by the Assessing Officer.
So far as the merits of the issue is concerned, the Assessing Officer rejected various explanations given by the assessee and made addition of Rs.60.00 lakhs to the total income of the assessee u/s 69A of the Act as unexplained bank deposit.
The assessee filed objection before the DRP who vide order dated 24.1.2022 dismissed all the grounds raised by the assessee before them by observing as under:
“2.6.1 Having considered the submissions; the assessee has filed return of Income for AY 2017-18 on 03-03-2018. The case was selected for limited scrutiny under CASS for examination of cash deposit during the year. The AO ward-2, Karimnagar issued notice U/s 143(2) on 09-08-2018. The case was transferred to ACIT, circle 6(1), Hyderabad. The assessee filed reply on 14-11-2019 for the Sources of cash deposits. The ITO Karimnagar finally sends the file to jurisdictional Assessing Officer ADIT (International Taxation)-2, Hyderabad. 2.6.2 The ADIT (International Taxation)-2, Hyderabad did not post the case for further hearing by giving any opportunity to the assessee and the case got time barred and computer screenshot shows the status of proceeding as closed. The JAO (jurisdiction Assessing Officer) did not pass any Assessment Order U/s 143(3 144 of the IT Act,1961. The assessment proceedings were barred by limitation U/s 153 of the IT Act, 1961. 2.6.3 On 04-03-2020 the JAO issued notice U/s 148 of the IT Act,1961. The assessee filed Return of income in response U/s 148 of the IT Act,1961 on 14-03- 2020 .
ITA 71 of 2022 Venkateswara Rao Ponnuru
2.6.4 The reasons recorded for re-opening the assessment were communicated to the assessee as per notice ü/s i43(2) r.w.s 147 of the IT Act,1961 dated 4-1 2020. The AO is in compliance of the case law GKN Driveshafts (India) Ltd. vs. TO in civil appeal no. 7731 to 7737 of 2002(SC). 2.6.5 We note that the limited scrutiny Assessment proceedings U/s 143(3) initiated by ITO Karimnagar, ACIT, Circle-6(1), Hyderabad and finally by ADIT (International Taxation)-2, Hyderabad is barred by limitation. The JAO invoked the provision of section 147 of the IT Act, 1961 as the assessing officer had Reasons to believe that any income chargeable to tax has escaped assessment for the relevant Assessment Year. The JAC had reasons to believe that income has escaped assessment. The reasons were communicated to the assessee as follows: “AS per the information available with this office, the assessee has made a huge cash deposit of Rs. 60,00,000/ in his bank account maintained with Axis Bank (Current Account # 916020042516778) Himayat Nagar Branch during AY 2017- 18. In the ITR for AY 2017-18 the assessee has declared his total income 5s 0,4,/0. The cash deposits made by the assessee during The AY 201/-18 60,00,000. Therefore, the cash deposit is far in excess of the sources of income declared by the assessee. The return of income was only processed the 1.T Act 1961. As the case has never been taken up for scrutiny, there is an under-assessment of income to the extent of Rs. 60,00,000." 2.6.6. We note that as per IT Act, 1961 there is no bar on issuing a notice /s * for invoking proceeding ü/s 147 of the IT Act, 1961 in case where 143 proceedings were initiated by the AO but got time barred by limitation. 2.6.7 The AO action is as per the section 147 Explanation 2(b) of the IT Act 1961 which is reproduced as below is applicable in instant case of assessee. “(b)where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return." 2.6.8 As per the submission of the assessee's letter dated 23-02-2021. The assessee has replied to the notice U/s 142(1) dated 22-02-2021 and show cause notice dated 12-02-2021. That the money of Rs. 60 lacs belong to assessee's late father and late brother. "The money of Rs. 60 lacs belongs to my late father and late brother: my brother was unmarried and he had no dynasty. My late Brother, P. Siram sold the property adjacent to my property for Rs. 38.00 lacs during his lifetime. He kept that money with him. My late father's money is with my mother. After her death, the money was in possession of my late bother.
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My late brother, Mr. P. Sriram died in an accident in July,2014 I noticed this money in his Almirah in 2016, when I came to India on vacation, in July/August, 2016. As, I am the only male member of the family, the money was inherited by me. As I could not stay for more adays, I have deposited the money in August 2016 in my Axis Bank account and left to Kuwait for performing my duties, since, the money is inherited, the same is not taxable in my hands. " 2.6.9 During the proceedings U/s 147 the above reply dated 23-02-2021 is the new information to the AO that the money belongs to the late father and late brother. In the reply it is only a statement made by the assessee without any proof or evidence 2.6.10. On merits of the submission there is no evidence that the money of Rs. 60 lacs belong to his late father and brother. The assessee has failed to prove that the money belongs to his late father and late brother. The ownership of the money is not proved with any tangible evidence. Therefore, as per Indian evidence act when any money, bullion, Jewellery any valuable article or thing are or is found in the position or control of any person it is presumed that it belongs to such person. The claim of the assessee that Rs. 60 lacs is inherited from his late brother and late father is without any legal evidence. 2.6.11 The cash of Rs. 60Lacs /- is deposited in the assessee's own Axis bank current account and therefore, the assessee is liable to explain the source of the cash deposit. 2.6.12 Therefore, the claim that the money being inherited and is a hereditary income is hereby rejected on lack of any evidence and on merits. 2.6.13 The Assessee has relied on case laws. CIT VS. Tarajan Tea Company (P) Ltd Appeal (Civil) 1941 of 1993, reported in 236 ITR 447(5.C) date of Judgement 04/02/199. ITO ward 41(2), Kolkata Vs. M/s Epkon Associates, Kolkata, ITA No. 1425/Kol/2014/A. Y 2005-06, 30/5/2018. SH. Abrar Ahmad Qasimi, New Delhi Vs. ITO, New Delhi TA No.3177/DEL/2017, Asst. Year. 2007-08 In the Appellate Tribunal, Delhi Benches "SMC": Delhi. ACIT & Anr. Vs. Hotel Blue Moon [(2010)321 ITR 362(SC)]. and 5more case laws as per Annexure Vi of the paper book dated 14th June 2021 2.6.14 The case laws relied by the assessee are distinguishable in facts and in law and are not applicable in the present case where the issue involved is cash deposit of Rs. 60 lacs by the assessee in his own current account of AXiS bank. 2.6.15 We don't find any infirmity in the action of the AO in issuing notice U/s 148 of the IT Act 1961 and proceedings U/s 147 of the IT Act. These grounds of objections are here by rejected.
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2. 4 Ground of objection No. 4: Objection No.4 14 The Ld. Assessing Officer erred in belated serving of notice u/s.143(2) of the I.T Act, 1961 read with sec. 147 of the IT Act, 1961 after expiry of 6 months from the end of the financial year in which the assessee filed the return of income. 2.4.1 t Having considered the submissions, the assessee contention is that the notice U/s.143(2), the requirement is" serving the notice on the assessee within 6 months from end of the financial year in which the return of income files by the assessee. In the case of the assessee, time limit for serving the notice u/s 143(2) expires by 30/09/2020 as the return of income was filed on 14.03.2020 against the notice issues U/s.148 of the Income tax Act,1961. 2.4.2 we note that the notice U/s 143(2) was served on the assessee on 04-Ll2020. As per The Gazette of India published on 29-09-2020. Chapter-ll relaxation of certain provisions of specifies Act. 3. (1) Where, any time- limit has been specified in, or prescribed or notified under, the specified Act which falls during the period from the 20th day of March, 2070 to the 31st day of December, 2020 or such other date after the 31st day of December,2020 as the Central Government may, by notification, specify in this behalf, for the completion or compliance of such action as *Completion of any proceedings or * passing of any order or * issuance of any notice, * intimation, notification, Sanction or approval, * or such other action, by whatever named called, under the provision of the specific Act, or.. The date is extended to 31st March 2021. 2.4.3 The service of notice U/s 143(2) falls under such other action, by whatever named called by an authority... 2.4.4 Therefore, the notice was served as per the RELAXATION OF CERTAIN PROVISIONS OF SPECIFIED ACT Gazette of India notification dated 29-09- 2020. 24.5 We note that the date is extended to 31st March 2021 as per above mentioned Gazette notification. The notice dated 04-11-2020 is served on the assessee within the time limit. We reject this ground of objection. 2.7 Ground of objection No. 7 Objection No. 7.1: The Ld. Assessing Officer erred in applying the provisions of sec. 69A of the IT Act, 1961, though the said provisions are not applicable to the assessee who need not maintain books of accounts as an employee in foreign Country. 2.7.1 Having considered the submissions, the AO has applied provisions of section 69 A of the IT Act 1961 because the assessee is found to be owner
ITA 71 of 2022 Venkateswara Rao Ponnuru of the money i.e., cash of Rs. 60 lacs in his own current account Axis bank and the assessee has not disclosed the cash deposit in his Return of income Filed. Further the explanation Offered by the assessee that Rs. 60 lacs belong to his late father and late brother is without any legal evidence. There is no tangible evidence to prove that this cash belongs to his late father and late brother. Therefore, this unexplained money U/s 69A of the IT Act,1961. For application of the sectic69A of the IT Act,1961 maintaining the books of accounts is not mandatory condition. We don't find any infirmity in the application of section 69A of the Act in the case of the assessee. We reject this ground of objection.”
The Assessing Officer in the final order dated 15.2.2022 passed u/s 147 r.w.s. 144C of the I.T. Act made addition of the same.
9. Aggrieved with such order of the Assessing Officer, the assessee is in appeal before the Tribunal by raising the following grounds: “
1. The Assessment order processed u/s. 147 read sec.144C (13) by the Ld. Assessing Officer is erroneous as per law and facts and also on presumptions, as the appellant's deposits in bank account cannot be presumed as his income or deemed income for invoking the provisions of sec. 147.
2. When on the basis of original return filed on 30/3/2018 was selected for limited scrutiny in CASS on the reason of verification of bank deposits made before demonetization and having initiated assessment proceedings by serving a notice u/s. 143(2) and later on issued notice u/s.142(1), i.e., after starting scrutiny assessment proceedings, without completing assessment u/s. 143(3) as required in the income tax act, invoking the provisions of sec. 147 of the income tax act is incorrect and also illegal on the part of the Ld. Assessing Officer.
3. The provisions of sec. 147 clearly speaks that "if the assessing officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sec. 148 to 153, assess or assesses... This clearly shows that an assessment barred by limitation cannot be assessed or reassessed u/s 147. In the Assessee's case no assessment order was passed after initiating8 scrutiny assessment proceeding u/s.143(2) and the scrutiny proceedings were "Closed" without passing any order u/s. 143(3). There is no provision for the assessing officer to close the assessment proceedings without passing order u/s. 143(3) and hence the assessment is to be treated as barred by limitation u/s. 153.
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The Appellant filed the return of income on 14/03/2020 after receiving the notice u/s.148. On 16/03/2020, the assessee filed a letter requesting for reasons recorded before issuing the notice u/s. 148. The assessing officer has not given the reasons recorded as per the procedure laid down by the Hon'ble Supreme Court in the case of GKN Drive Shafts (India) Ltd Vs. ITO in civil appeal no. 7731to 7737 of 2002 within the reasonable period. The learned assessing officer mentioned that the "issues as per reasons recorded for reopening" in the notice u/s. 143(2) read with sec. 147 of the income tax act 1961 dated 04/11/2020 and saying in the assessment order that the reasons were already given. The Assessee contests that reasons recorded before issuing the notice u/s. 148 and not before reopening the assessment. The contents mentioned in the notice by the assessing officer does not contain the words "reason to believe", "satisfaction of the Assessing officer for the income escaped from the assessment". Hence, assessment order passed u/s. 147 read with sec. 144C(13) is illegal and void.
At Para 4.3 of page 16 of the Assessment Order u/s. 147 read with sec.144C(13), it is mentioned by the Learned Assessing Officer that " it is to submit that the scrutiny proceedings which were dropped, due to the technical defects in the notice u/s. 143(2), has no baring whatsoever on the ongoing 148 proceedings which is altogether independent proceedings" this version of the learned Assessing officer is incorrect. The Scrutiny proceedings were 'closed' as per the computer screen shot. There is no such provision in the income tax act to close assessment proceedings. The ITO ward 2(2), Karim Nagar served the defective notice and transferred the case to ACIT circle 6(1). There was time to serve notice u/s. 143(2), for ACIT Circle 6(1) being the Prescribed income tax Authority', but he has not served the notice. It is only 'not taking action' and not a "technical defect". Hence, the case is to be taken as time barred. 6. In the proceedings of the Dispute resolution panel 1, Bengaluru giving directions under sec. 144C(5) of the income tax act, 1961, the Learned Commissioners of the Income tax, being the members of Dispute Resolution Panel(DRP) clearly stated at para 2.6.5 of the proceedings in Page 3 that the limited scrutiny proceedings u/s sec.143(3) is barred by limitation. When the Department itself agreeing that the scrutiny proceedings initiated were barred by limitation, it is unjust to invoke the provisions of sec. 147. 7. As stated at para 2.6.9 in page 4 of the Directions of DRP, the contents of Appellants Letter dt.23.2.2021 is not new information to the learned assessing officer, it is only reply of the Appellant explaining the sources of cash deposit in the bank during the course of the assessment proceedings. Depositing the money in bank account is only the proof. At para 6.2.10, the learned members stating about evidence act. When sec.
ITA 71 of 2022 Venkateswara Rao Ponnuru 69A of the Income tax act, 1961, stating about the ownership and not recorded in the books of accounts if any, maintained by the Assessee for any source of income and offers no explanation going to Indian evidence act which says about the "Position or Control" is in correct. The Appellant explained that the money belongs to his late kith and kin and inherited by him and other survivors and deposited the same in bank account. The provisions of sec. 69A does not speak anything about the money deposited in Bank and there are about other items mentioned in the Section for which bank will not come into picture and hence, meaning of ownership is to be taken that it should be in physical position. Hence the contentions on imagination of the assessing officer are incorrect and erroneous.
8. The view of the Assessing officer in the Assessment order u/s. 147 read with sec. 144C(13) in page 16 that the filing of Return of income against the notice u/s. 148 leads to treat the appellant has took part the proceedings is incorrect. Filing of return of income in response to notice u/s. 148 is responsibility of the assessee. It cannot be treated that the proceedings are accepted and the assessee should not ask any thing regarding the reasons for reopening the assessment.
Cash Deposited in the bank account cannot be treated as income of the assessee or investment of the assessee. It is also not included u/s. 2(24) of the income definition of the income tax Act, 1961. When these deposits are subject matter of the limited scrutiny proceedings for verification u/s. 143(2), on the same ground and without having fresh tangible information. Provisions of sec. 147 cannot be invoked.
10. The Assessing Officer is stating that action u/s. 147 is as per explanation 2 (b) of the IT Act, 1961. This is incorrect as in assessee's case, assessment proceedings were "Closed" and no question of 'No assessment has been made' does not arise. The assessee has also not understated the income as money deposited in the bank account will not come under the preview of income. The question of deemed income cannot be assumed or imagined by the learned assessing officer before invoking the provisions of sec. 147.
The notice u/s. 143(2)) read with sec. 147 was served on the assessee on 4/11/2020. Actually, such notice should be served within 6 months from the end of the financial year in which the return of income is filed by the assessee. Such period will end by 30/09/2020, hence the notice served on 04/11/2020 is an invalid notice. At para 2.3 in page 11 of the assessment order the assessing officer stated that there was an embargo on issuing notice to the assessee till September 18th, 2020 in view of the CBDT's direction. Even then still there was 12days time to the Assessing Officer for serving notice u/s. 143(2). The TAXATION AND OTHER LAWS (RELAXATION AND AMENDMENT OF CERTAIN PROVISONS) ACT, 2020 dated 29/09/2020 will not speak anything about the service of a notice. As stated in chapter 2 Clause 3(1) and sub clause A of the said Act, the words are not applicable to assessee's case because no time limit has ITA 71 of 2022 Venkateswara Rao Ponnuru been prescribed for any notice in the income tax act except to notice u/s.
Bar on issuance of notice cannot be attributable to service of notice, which is mandatory and not procedural as stated by Hon'ble supreme Court in the case of Asst. Commissioner of IT & Anr Vs. M/s. Hotel Blue Moon in Civil Appeal NO. 1198 of 2010 and this point of law is settled by the Hon'ble Supreme Court is binding on the entire India as per Constitution and the above act will not applicable to our case.
12. The learned Assessing officer has not followed the Standard operating procedure (SOP) in finalizing the assessment proceedings such as providing reasons recorded before issuing notice u/s. 148 and invoking sec.
The learned assessing Officer also not followed the SOP in issuing and serving of notice u/s. 143(2) read with Sec. 147 as per the case law of the Hon'ble Supreme Court in ACIT and Anr. Vs. Hotel Blue Moon (2010), 321 ITR 362 (SC). It is also stated by the learned assessing Officer that the decision of Hon'ble Supreme Court in the case of CIT Vs. Tarazen Tea Co. Private Limited, Appeal (Civil) 1941 of 1993 reported in 2FORM ITR 447(SC) date of Judgement 04/02/1999 is not applicable to the assessee's case and it is incorrect.
13. The Learned Commissioners of Income tax (Members) of Dispute Resolution Panel have stated in Para 2.6.13 and 2.6.14 at page 5 of their proceedings u/s. 144C(5) have mentioned that the case laws relied by the assessee are distinguishable in facts and in law and are not applicable in the case of assessee is incorrect. In the case of CIT VS. Tarazen Tea Co. Private Limited, Appeal (Civil) 1941 of 1993 reported in 236 ITR 447(SC) date of Judgement 04/02/1999, wherein it was held that: "Information which was with the AO at the time of original assessment cannot be used for reopening the Assessment u/s.147". In the case of ACIT and Anr Vs. Vs. Hotel Blue Moon(2010), 321 ITR 362 (SC) it is held that "it is mandatory for the AO to issue notice u/s.143(2). The issuance and service of notice u/s. 143(2) is mandatory and not procedural. If the notice is not served within the prescribed period, the assessment order is invalid. Reassessment Notice. assessee intimating original return be treated as fresh return .Reassessment proceedings completed despite assessee filing affidavit denying service of notice u/s. 143(2). ***. Assessing Officer not representing before commissioner (Appeals) that notice had been issued.. Reassessment order invalid due want of notice u.sl143(2). ., Income tax, 1961, ss.143, 147,148, prov.... ITO Vs. R K Gupta (308) ITR 49 (Del) tribu. --- The above Judgements of Hon'ble Supreme court relates to law (Legal issue) and the findings cannot be stated as distinguishable facts and law, the decision by the Hon'ble Supreme court is binding on lower Authorities in India and also binding on the public as per article 141 of the constitution of India.
ITA 71 of 2022 Venkateswara Rao Ponnuru Hence, it is incorrect to say by the learned Commissioner's(Members) of Dispute Resolution Panel that the case laws are not applicable to the Appellant Assessee.
The learned assessing Officer is incorrectly applied the provisions of sec. 69A, though all the conditions of the section are not applicable in the assessee's case. The assessee is an NRI and not having any activity in INDIA. He has not filed any return of income in earlier years as there is no taxable income in India. He has not maintained any books of Accounts. Since, the word used between the conditions in the act is "and" and not "or", all the conditions should satisfy for applying the provisions of sec. 69A. Money deposited in the bank account is not an income. The assessee has not maintained any books of account hence, the provisions of section 69A shall not apply at all”.
The learned Counsel for the assessee while challenging the validity of the re-assessment proceedings submitted that the assessee filed the original return of income u/s 139(4) of the Act on 3.3.2018 copy which is placed at pages 1 to 25 of the Paper Book. He submitted that the case was selected for limited scrutiny for explaining the cash deposits made by the assessee during the year and accordingly notice u/s 143(2) of the Act dated 9.8.2018 was issued by the Assessing Officer being the Income Tax Officer Ward-2 Karimnagar, copy of which is placed at pages 26 to 29 of the Paper Book. Referring to page No.30 to 32 of the Paper Book, he drew the attention of the Bench to the notice issued u/s 142(1) wherein Annexure was attached to the notice asking the assessee to give details of cash deposits by the assessee in his Bank A/c. Referring to Pages 33 to 44 of the Paper Book, he submitted that the assessee had filed detailed reply before the Assessing Officer challenging the validity of the jurisdiction of the Assessing Officer as well as explaining the source of such cash deposits in the bank a/c. Referring to page 43 of the Paper Book, the learned Counsel for the assessee drew the attention of the Bench to the screenshot of the I.T. Website according to which the assessment proceeding u/s 143(3) is closed. Referring to page 44 of the Paper book, he submitted that the notice u/s 148 of the I.T. Act was issued to the Page 11 of 20
ITA 71 of 2022 Venkateswara Rao Ponnuru assessee on 4.3.2020 in response to which the assessee filed his return of income on 14.3.2020 declaring the income originally returned. Subsequently the assessee was provided with the reasons according to which the reopening was for the cash deposit of Rs.60.00 lakhs in the Bank A/c maintained with Axis Bank.
11. The learned Counsel for the assessee submitted that once a notice u/s 143(2) is issued by the Assessing Officer, he is duty bound to pass an order u/s 143(3) which is mandatory in nature and the Assessing Officer cannot reopen the assessment u/s 147 of the I.T. Act on the same set of facts.
Referring to the decision of the Hon'ble Delhi High Court in the case of KLM Royal Dutch Airlines reported in 292 ITR 49 (Del), he submitted that the Hon'ble High Court in the said decision has held that once an inquiry has been initiated by the Assessing Officer, it cannot but result in either the return being accepted as having been correctly computed by the concerned assessee, or in an assessment being conducted and concluded thereon by the Assessing Officer.
Referring to the decision of the Hon'ble Calcutta High Court in the case of Mohindra Mohan Sirkar vs. Income Tax Officer reported in (1978) 112 ITR 47 (Cal), he submitted that the Hon'ble High Court in the said decision has held that once a notice u/s 143(2) is issued, the Assessing Officer has to complete the assessment u/s 143(3).
14. Referring to the decision of the Hon'ble Supreme Court in the case of CIT vs. Tarajan Tea Company (P) Ltd Page 12 of 20
ITA 71 of 2022 Venkateswara Rao Ponnuru reported in 236 ITR 447, dated 4.2.1999, he submitted that the Assessing Officer cannot reopen the assessment on the same reason which were made before at the time of the original proceedings. Referring to the said decision, he submitted that the notice u/s 148 cannot be issued purely on a change of opinion since during the original scrutiny assessment proceedings all material facts were fully and truly disclosed in the regular assessment proceedings and the failure of the Assessing Officer not to pass the order cannot be attributed to the assessee.
Referring to the notice issued u/s 143(2) dated 4.11.2020 by the ADIT (International Taxation)-2 Hyderabad, he submitted that the reasons recorded shows that the return of income was only processed u/s 143(1) of the I.T. Act and has never taken for scrutiny which is completely incorrect. He submitted that the reopening of the assessment or recording/reporting wrong reasons makes the reopening a nullity. He accordingly submitted that the reopening of the assessment should he held as not in accordance with law and accordingly the same should be quashed.
The learned DR, on the other hand, strongly opposed the arguments advanced by the assessee. He submitted that although the notice was issued u/s 143(2) by the Income Tax Officer Ward-2 Karimnagar on 9.8.2018 and served through email of the assessee, however, the Assessing Officer subsequently transferred the case to Range-6 Hyderabad as per the address in the return of income. The Income Tax Officer Ward-6 Hyderabad transferred the case record to the ACIT Circle 6(1) on 23.8.2018 who vide notice u/s 142(1) dated 17.9.2019 called for certain information. However, subsequently when it was found that the Page 13 of 20
ITA 71 of 2022 Venkateswara Rao Ponnuru assessee is an NRI working as a Doctor by profession and residing in Kuwait, the case was transferred to the Dy. CIT (International Taxation)-2 Hyderabad. Since the jurisdiction of the assessee falls under the Assessing Officer of the International Taxation Division, the original proceedings were dropped and notice u/s 148 was issued by reopening the case after due approval by the superior authorities.
So far as the argument of the learned Counsel for the assessee that the proceeding u/s 143(3) was closed and no assessment order was passed by the Assessing Officer is concerned, he submitted that as and when the time limit for scrutiny expires, the ITBA Portal shows as “closed”. This does not mean that the assessment proceedings u/s 143(3) are complete or the Assessing Officer has accepted the information furnished by the assessee. He submitted that there is no bar on the Revenue for issue of a notice u/s 148 for invoking the provisions u/s 147 in case 143(3) proceedings are initiated by the Assessing Officer but got time barred by limitation. Further, there is no mention in the Act not to reopen the case when the scrutiny proceedings u/s 143(3) got time barred. Referring to provisions of section 147, he submitted that the reopening of the assessment is in accordance with law. Therefore, the grounds raised by the assessee on the issue of validity of re-assessment proceedings should be quashed.
We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned DRP and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find in the instant case the assessee filed his return of income u/s 139(4) on 3.3.2018 and the case was selected for limited scrutiny Page 14 of 20
ITA 71 of 2022 Venkateswara Rao Ponnuru for verification of the cash deposits during the year. We find the Assessing Officer issued notice u/s 143(2) on 9.8.2018 copy of which is placed at 26 to 27 of the Paper Book which is as under:
ITA 71 of 2022 Venkateswara Rao Ponnuru
Similarly, we find the Assessing Officer in the notice issued u/s 143(2) dated 17.9.2019 has enclosed the following Annexure copy of which is placed at pages 31 & 32 of the Paper Book:
ITA 71 of 2022 Venkateswara Rao Ponnuru
ITA 71 of 2022 Venkateswara Rao Ponnuru
We find the assessee has filed detailed reply before the Assessing Officer in response to the notice u/s 143(2) and 142(1) copies of which are placed at paras 33 to 37 of the Paper Book. We find the Portal of the I.T. Department shows that the proceedings u/s 143(3) were closed, the screenshot of which is placed at 43 of the Paper Book and which shows as under:
We find the Assessing Officer issued notice u/s 148 of the I.T. Act by recording the reasons according to which there is escapement of income to the tune of Rs.60.00 lakhs being cash deposited in the Bank A/c of the assessee. Under these circumstances, we have to see as to whether the reopening of the assessment for escapement of income of Rs.60.00 lakhs is correct or is justified when the case was selected for limited scrutiny for verification of the cash deposits in the Bank A/c on the basis of the return of income filed originally u/s 139(4) of the I.T. Act and proceedings u/s 143(3) were dropped/closed without passing any order u/s 143(3) of the Act.
ITA 71 of 2022 Venkateswara Rao Ponnuru
We find the Hon'ble Delhi High Court in the case of KLM Royal Dutch Airlines (Supra) has held that once an inquiry has been initiated by the Assessing Officer, it cannot but result in either the return being accepted as having been correctly computed by the concerned assessee, or in an assessment being conducted and concluded thereon by the Assessing Officer.
We find the Hon'ble Calcutta High Court in the case of Mohindra Mohan Sirkar (Supra) has quashed the re-assessment proceedings holding that it is the duty of the A.O to pass an assessment order and held where the Income Tax Officer acted on the returns filed by the assessee, issued notices U/s 143(2) and heard the assessee U/s 143(3), but, without completing the assessment, he took recourse to reopen the assessment under section 147 by issuing notices U/s 148, then, in that case, the Income Tax Officer acted without jurisdiction in issuing the notices.
We find the Hon'ble Supreme Court in the case of Tarajan Tea Co (P) Ltd & Trustees of H.E.H. the Nizam Supplemental Family Trust (Supra) has held that the Assessing Officer cannot reopen the assessment on the same reasons which were before him at the time of the original proceedings. Since in the instant case the case of the assessee was selected for limited scrutiny to verify the cash deposit by issuance of notice u/s 143(2) and 142(1) and since the assessee has filed the requisite details, therefore, merely because no order was passed u/s 143(3), the Assessing Officer, in our opinion, cannot issue notice u/s 148 by reopening the assessment for escapement of the very same income which was the subject matter of scrutiny
ITA 71 of 2022 Venkateswara Rao Ponnuru proceedings. We accordingly quash the re-assessment proceedings. Since the assessee succeeds on this legal ground, the various other legal grounds challenging the validity of the assessment and the addition on merit have become academic in nature and therefore, are not being adjudicated.