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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI CHANDRA MOHAN GARG
ORDER This appeal filed by the assessee is directed against the order dated 15.11.2019 of the CIT(A), Ghaziabad, relating to Assessment Year 2010-11.
Briefly stated facts of the case are that the assessee is an individual and has filed his return of income on dated 01.06.2010 declaring total income at Rs.2,15,500/-. In this case, AIR information was received by 2 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. the A.O. that the assessee has sold residential house no.3/1045, Sector-3, Vasundhara, Ghaziabad for a consideration of Rs.46,55,000/- during financial year 2009- 10 relevant to the assessment year 2010-11. To verify the chargeability to tax under the head ‘capital gains’ on the sale of immovable property, verification letters dated 04.03.2016, 25.04.2016, 09.09.2016 and 17.01.2017 were issued and sent to the assessee through speed post at the address provided in the AIR information. In compliance, assessee did not furnish any reply about the capital gains arising on sale of immovable property. Since the assessee could not furnish any reply, therefore, proceedings under section 147 of the I.T. Act, 1961 has been initiated by the A.O. with the prior approval of the Principal Commissioner of Income Tax, Ghaziabad and the A.O. issued notice under section 148 of the I.T. Act, 1961 dated 30.03.2017. Since, there was no compliance to the said notice, the A.O. issued statutory notices under section 142(1) of the I. T. Act, 1961 dated 15.05.2017, dated 06.10.2017 along with questionnaire. However, the assessee has not made any 3 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. compliance of the statutory notices sent to him. Therefore, the A.O. issued show cause notice under section 144 of the I. T. Act, 1961 dated 17.11.2017 fixing the case for hearing on 28.11.2017. On 01.12.2017 the Authorised Representative of the Assessee attended and requested for adjournment and the case was adjourned to 06.12.2017. On 06.12.2017, the Authorised Representative of the Assessee filed his written submission. Since the A.O. noted that the details furnished by the assessee are incomplete, the A.O. adjourned the case to 14.12.2017, to which date also, there was no compliance made by the assessee. During the course of assessment proceedings, on perusal of sale details, the A.O. noted that the assessee has sold residential House No.2/1045. Sector-3, Vasundhara, Ghaziabad for a consideration of Rs.46,55,000/-. Though statutory notices under section 142(1) of the I.T. Act, 1961 were issued to the assessee, however, the assessee failed to submit the supporting documents to calculate the capital gain. The A.O. noted that the assessee has deliberately and knowingly avoided the assessment proceedings and has offered no 4 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. explanation about the capital gains. Therefore, the A.O. had no option, but to complete the assessment under section 143(3)/l47 of the I.T. Act, 1961 on the basis of material available on the record and determined long term capital gains of assessee at Rs.27,93,000/- and added interest of Rs.1,56,935/- totaling to Rs.29,49,935/- and determined the total income of the assessee at Rs.31,65,435/- [i.e., Long term capital gains of Rs.29,49,935/- + Return of income shown by the assessee at Rs.2,15,500/- = Rs.31,65,435/-] under section 143(3)/147 of the I.T. Act, 1961 and also initiated penalty proceedings under section 271 (1)(c) of the I.T. Act, 1961 separately for concealing of long term capital gains income.
2.1. Aggrieved by the order of the A.O, the assessee carried the matter in appeal before the Ld. CIT(A), who vide order dated 15.11.2019 treated the addition made by the A.O. on account of long term capital gains at Rs.27,93,000/- as short term capital gains and enhanced the amount to Rs.46,55,000/-.
5 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. 3. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal and has raised the following grounds :
“1. That on the facts and in the circumstances of the case and in law, the order passed by Learned Income Tax Officer, Ward-2(4), Ghaziabad (Ld. AO) under section 143(3) read with section 147 and order passed by Learned Commissioner of Income Tax (Appeals), Ghaziabad [Ld. CIT(A)] under section 250 of the Income-tax Act, 1961 (the Act), is wrong and bad in law.
2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Ld. AO in passing the order under section 143(3) of the Act, without issuing the initial notice under section 143(2) of the Act, and hence, the assessment framed is bad in law and liable to be annulled.
6 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. 3. That on the facts and circumstances of the case and in law, the assessment reopened by the Ld. AO and as confirmed by Ld. CIT(A) lacks mandatory conditions prescribed under section 147 of the Act, thereby, leading to invalid jurisdiction and illegal reassessment being made which is liable to be quashed.
That the Ld. CIT(A) erred on facts and in law in enhancing the income of the appellant to 1NR 46,55,000 by ignoring the submissions and explanations furnished by the appellant, while treating the transaction as short term capital gain on sale of property.
5. That on the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that there arises no capital gain chargeable to tax on the sale of property as per the provisions of the Act.
7 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. 6. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not accepting the documents submitted as additional evidence by the appellant under Rule 46A of Income Tax Rules, 1962 (the Rules) during the course of appellate proceedings substantiating the genuineness of the transaction.
7. That on the facts and circumstances of the case and in law, the Ld. AO and Ld. CIT(A) erred in making the adjustment based on factually erroneous premises and built upon surmises and conjectures.
That on the facts and in circumstances of the case and in law, the Ld. AO and Ld. CIT(A) erred in making an addition of 1NR 156,935 on account of interest income in an arbitrary manner.
That on the facts and circumstances of the case and in law, the Ld. AO and Ld. CIT(A) erred in not providing appropriate opportunity to the 8 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. appellant to furnish the submissions against the additions determined in the orders.
That the Ld. AO erred on facts and in law in levy of interest under section 234A and 234B of the Act.
That the Ld. AO erred on facts and in law in initiating penalty proceedings under section 271 (1)(c) of the Act.
The above grounds of appeal are mutually exclusive and without prejudice to each other.
The appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal.”
4. During the course of hearing, the Learned Counsel for the Assessee at the very outset submitted that the A.O. has not issued the statutory notice under section 143(2) of the I.T. Act, 1961 and, therefore, in absence of such notice, the assessment framed by the A.O. cannot be 9 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. sustained in the eye of law and prayed that the assessment be annulled. In support of this contention, the Learned Counsel for the Assessee drew the attention of the Bench of the assessment order in which the A.O. has not mentioned about issuance of statutory notice under section 143(2) of the I.T. Act, 1961. The Learned Counsel for the Assessee also drew the attention of Bench at pages 9 to 11 of the paper book with respect to order sheet entries wherein the A.O. issued notices under section 142(1) only, but, no notice under section 143(2) has been issued to the assessee and in absence of such notice, the assessment framed under section 143(3)/147 of the I.T. Act, 1961 cannot be sustained in the law and, he, therefore, prayed that the assessment framed by the A.O. be annulled. The Learned Counsel for the Assessee also further drew the attention of the Bench of the order of the Ld. CIT(A) at page-8, para 6.1, in which, it is stated that notice under section 143(2) of the I.T. Act, 1961 has not been served by the A.O. upon the assessee. The Learned Counsel for the Assessee, accordingly, prayed that the assessment framed by the A.O. under section 10 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. 143(3)/147 of the I.T. Act, 1961 in absence of issuance and serving of notice upon the assessee under section 143(2) be annulled as the authorities below violated the principles of natural justice of providing adequate opportunity of being heard the assessee. In support of this contention, the Learned Counsel for the Assessee relied upon the decision of Coordinate Bench of Delhi Tribunal in the case of Flovel Energy Pvt. Ltd., New Delhi vs., ACIT, Circle-9(1), New Delhi in ITA.No.6485/Del./2019 order dated 29.11.2019 which is placed at pages 68 to 78 of the paper book.
On the other hand, Ld. D.R. heavily relied on the orders of the authorities below and prayed that the order of the Ld. CIT(A) be confirmed.
I have heard the rival submissions of both the parties and perused the material available on record. In the instant case, in the grounds of appeal, the Learned Counsel for the Assessee has put-forth his arguments mainly on the ground of annulling the assessment in absence of issuance of notice by the A.O. under section 143(2) of the I.T. Act,
11 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. 1961. From the careful perusal of the orders of the authorities below and the order sheet entries placed on record, I have noticed that no notice under section 143(2) of the I.T. Act, 1961 has been issued/served upon the assessee. Therefore, I find force in the arguments of the assessee that in absence of statutory notice under section 143(2) the consequent assessment framed under section 143(3)/147 of the I.T. Act, 1961 cannot be sustained in the eye of law. I have noticed on identical facts the Coordinate Bench of Delhi Tribunal in the case of Flovel Energy Pvt. Ltd., (supra) has annulled the assessment order by following the Judgment of Hon’ble jurisdictional Delhi High Court in the case of Alpine Electronics Asia Pvt. Ltd., reported in 341 ITR 274 wherein the Judgment of Hon’ble Supreme Court in the case of Hotel Blue Moon reported in 321 ITR 362 (SC) has been referred. I find even provision of Section 292BB of the I.T. Act, 1961 does not cure non-issuance of notice as held by Hon’ble jurisdictional Delhi High Court in the case of PCIT vs., Jai Shiv Shankar Traders [2016] 383 ITR 448 (Del.). For better appreciation of the issue in dispute, the 12 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. relevant observations of the Coordinate Bench of Delhi Tribunal in the case of Flovel Energy Pvt. Ltd., New Delhi vs., ACIT, Circle-9(1), New Delhi (supra) are reproduced as under :
“We find, under identical circumstances, the Tribunal in assessee’s own case in the immediately preceding assessment year, has held the assessment order to be bad in law on account of non-issuance of notice u/s 143(2) of the IT Act, 1961 within the stipulated time prescribed under the Act. The relevant observations of the Tribunal at para 5 read as under:-
“5. Heard the arguments of both the parties and perused the material available on record. We find that the judgment of Broadway Shoe Co . 99 Taxmann 83 relied by the ld. DR i s not applicable to the facts of the case as in that case the assessee has not filed a return in response to the notice issued u/s 148 of the Act whereas in the instant case, the 13 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. assessee has filed return u/s 139(1) of the Act in regular course and al so replied to the notice that the return filed by them on 15.10.2010 may be treated as returned filed in response to the notice u/s 148 issued on 09.01.2015. Under such circumstances, it is incumbent upon the Assessing Officer to issue notice u/s 143(2) within the time stipulated as per the provisions of the Act which he failed to observe. Hence, keeping in view the judgment o f Jurisdictional High Court in the case of Alpine Electronics Asia Pvt. Ltd. 341 ITR 247 wherein the judgment of Hotel Blue Moon 321 ITR 362 (SC) has been duly referred to, we hereby hold that omission to issue notice u/s 143(2) is not curable and the requirement cannot be dispensed with. It is mandatory to issue notice u/s 143(2) even in the case of reassessment u/s 148. Similarly, Section 14 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. 292BB incorporates the principle of estoppel and stipulates that an assessee who has appeared in any proceeding and co-operated in any enquiry relating to assessment or reassessment shall be deemed to be served with any notice which was required to be served and would be precluded from objecting that the notice was not served upon him or was served upon him in an improper manner or was not served upon him in time. However, the principle of estoppel does not apply if the assessee has raised objection in reply to the notice before completion of assessment or reassessment which is the issue in the instant case. Hence, keeping in view, the entire facts of the case and established judgments on the issue, we hereby hold that the assessment completed by the revenue cannot be held to be valid in the eyes of law.”
15 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh.
The Hon'ble Delhi High Court in the case of PCIT vs. Jai Shiv Shankar Traders Pvt. Ltd. (supra) has held that failure of the Assessing Officer to issue notice u/s 143(2) in reassessment proceedings, prior to finalizing reassessment order cannot be condoned by referring to section 292BB and is fatal to the order of reassessment. Various other decisions relied on by the assessee in the case law compilation also support his case that in absence of issue of notice u/s 143(2) even in reassessment proceedings, the order becomes invalid and has to be quashed. Since, in the instant case, the assessee filed the letter stating that the return filed originally may be treated as return filed in response to notice u/s 148 and since the notice u/s 143(2) was not issued within the statutory period and since the assessment was not completed u/s 144 nor any interest u/s 234A has been charged which indirectly proves that the assessee, in fact, has filed the letter stating that the return filed originally may be treated as return filed in response to notice u/s 148,
16 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. therefore, respectfully following the decision of the Tribunal in assessee’s own case for the immediately preceding assessment year, we hold that the assessment order passed by the Assessing Officer is not in accordance with law and has to be quashed. The legal ground raised by the assessee challenging the validity of the assessment order is accordingly allowed. Since the assessee succeeds on the legal grounds, the various other grounds raised by the assessee become academic in nature and, therefore, are not being adjudicated.
In the result, the appeal filed by the assessee is allowed.”
6.1. Since the facts of the present case are squarely covered by the order of Coordinate Bench of the Tribunal in the case of Flovel Energy Pvt. Ltd., New Delhi (supra) and in absence of any contrary decision brought to my notice by the Ld. D.R. that the said decision has been overruled, stayed or modified by any higher judicial forum, I hold that the assessment order passed by the A.O. is not sustainable
17 ITA.No.420/Del./2020 Shri Sanjay Singh, Ghaziabad, Uttar Pradesh. in law and, therefore, the assessment order is quashed. Accordingly, the grounds of appeal no.2 raised by the assessee is allowed. Since the assessee succeeds on the legal ground, the various other grounds raised by the assessee become academic in nature and, therefore, are not being adjudicated.
In the result, appeal of the Assessee is allowed. Order pronounced in the open Court on 19.10.2022.