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Income Tax Appellate Tribunal, JAIPUR BENCHES “B”, JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1377/JP/2019
ORDER PER: SANDEEP GOSAIN, J.M. This is the appeal filed by the assessee against the order of the ld. CIT(A)-I, Jaipur dated 11/09/2019 for the A.Y. 2008-09. The grounds taken by the assessee are as under: “1. Under the facts & circumstances of the case, the order passed U/s 148/144 by ld. AO is illegal and bad in law and is invalid abinitio.
2. The assessee has filed his Income Tax Return on time, obtained the Tax Audit Report on time and the return so filed was processed and refund was granted by the department which is duly posted in 26AS by the department, despite that reassessment proceedings were initiated for the reason that the assessee did not file his ITR, thus the very basis of selection of the case for reassessment u/s 147/148 of the Act is ill founded, grossly incorrect and false and in contradiction with the facts available with the department, hence, the reassessment proceedings 2 ITA 1377/JP/2019 _ Kana Ram Kumawat Vs ITO and resultant assessment order passed u/s 148 is invalid abinitio and need to be quashed in toto for the sake of justice.
3. The reassessment proceedings were undertaken and initiated without application of mind by the ld. AO, hence the same are highly unjustified and are not tenable in law hence the resultant assessment order needs to be quashed in entirely.
The ld. AO is not justified in passing assessment order without serving a proper and valid notice u/s 147 of the Act to the assessee.
5. The ld. CIT(A) has erred in law in not quashing the unlawful reassessment order passed by the ld. AO u/s 148/144 despite having accepted the fact in his appellate orders passed, that the assessee had filed the ITR in time and also the assessee had obtained the Tax Audit Report u/s 44AB on time, which tantamount to have admitted the fact that the assessment proceeding have been initiated on incorrect, false and ill-founded basis.
The ld. CIT(A) has erred in law in sustaining the additions to the extent of Rs. 129005/- made by the AO by application of net profit rate of 8% on the turnover, despite having admitted the fact that the assessee had declared total income of Rs. 253620/- based on audited accounts without rejecting the books of accounts u/s 145(3) of the Act.
The assessee craves to amend, alter and modify any of the grounds of appeal
.” The assessee has also raised additions grounds which are as under:
2. The very basis of selection of the case of the appellant for reassessment u/s 147/148 of the Act, is ill founded, grossly incorrect and false in contradiction with the facts available with the department, hence the reassessment proceeding and resultant assessment order passed u/s 148 is invalid abinitio and need to be quashed in toto for the sake of justice.
3. The reassessment proceedings were undertaken and initiated without application of mind by the ld. AO, hence the same are highly unjustified and are not tenable in law hence the resultant assessment order needs to be quashed in entirely.
3 ITA 1377/JP/2019 _ Kana Ram Kumawat Vs ITO 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
3. In this appeal, the assessee has raised additional ground which is against initiation of reassessment proceedings U/s 147 of the Income Tax Act, 1961 (in short, the Act). The assessee in his prayer has stated that this is a legal ground and these were inadvertently missed/skipped to be raised before the ld. CIT(A), therefore, prayed to admit additional grounds of appeal.
4. On the contrary, the ld. DR has objected to the prayer for admission of additional grounds.
5. From perusal of the record, we observed that the A.O. had issued notice U/s 148 of the Act and reassessment proceedings were initiated and the ld. AR has also argued that the A.O. has initiated the proceedings on the basis of non-existent and factually incorrect facts and reasons without application of mind and without verification of the facts available on record. Considering the prayer of the assessee as well as facts available on record, we are of the considered view, the additional ground raised by the assessee being a legal ground, needs a complete discussion on merits, therefore, we admit the additional grounds raised by the assessee for adjudication.
4 ITA 1377/JP/2019 _ Kana Ram Kumawat Vs ITO 6. The brief facts of the case are that the assessee has not filed his ITR for the year under consideration and the same has not been verifiable from the AST System. The A.O. issued notice U/s 148 of the Act on 25/3/2015 which was duly served upon the assessee. Subsequently, other necessary notices were issued to the assessee and finally assessment was completed U/s 148/144 of the Act determining total income of the assessee at Rs. 5,73,940/-.
7. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submission of parties and material placed on record, given part relief to the assessee. Against the said order of ld. CIT(A), the assessee has preferred the present appeal before the ITAT on the grounds mentioned above.
The main grievance of the assessee relates to initiation of reassessment proceedings U/s 147 of the Act. In this regard, the ld. AR has relied on the written submissions filed before the Bench and the same is reproduced below: “1. It is apparent that the assessee had complied with all the provisions of the Income tax as applicable to him for assessment year 2008-09 as below: i. Obtained the audit report in terms of section 44AB of the IT Act, 1961 within prescribed time limit. ii. Filed his ITR
5 ITA 1377/JP/2019 _ Kana Ram Kumawat Vs ITO iii. ITR was processed and refund was granted as reflected in 26AS. iv. The Id. CIT(A) accepts in his order that the Assessee filed his ITR that is confirmed from form 26AS showing processing of the said ITR and granting of refund on 9.11.2009. v. The CIT(A) also found that the assessee had obtained the Tax Audit Report within prescribed time limit, and accordingly deleted the penalty levied by the Ld. AO u/s 271B of the Act.
Thus the reasons recorded by the Ld. AO for reopening the assessment u/s 148 were factually incorrect and ill founded, and without application of his mind, as the assessee has not only filed the ITR, the ITR so filed by the assessee was also processed on 9.11.2009 and refund was also granted, as reflected in the income tax site in form 26AS copy enclosed, it is highly biased on the part of the Ld. AO that he himself refers form 26AS to ascertain the contract receipts of the assessee to levy the income tax on him but fails to appreciate that the ITR filed by the assessee was processed and refund was granted for the relevant assessment year duly reflected in Form 26AS. Moreover the Id. AO computes the income tax on the basis turnover reflected in Form 26AS but categorically denies to allow credit of TDS reflected in the same form 26AS.
It has a now a well settled law that reassessment proceedings initiated by the assessing officer on the basis of factually incorrect reasons, as apparent in this case and without application of his mind on the material before him, renders the reassessment proceedings u/s 148 invalid ab-initio.
6 ITA 1377/JP/2019 _ Kana Ram Kumawat Vs ITO Reliance is placed on the decision of this honorable bench in ITA/1014/JP/2018 in the case Shri Ram Mohan Rawat, Jaipur Vs. ITO Ward 2(1) Jaipur, where in the reassessment proceeding were initiated by the Id. AO by recording the reasons that the assessee had not filed his ITR, which was found incorrect later, it was held
Accordingly, in view of the above facts and circumstances of the case, when the AO has initiated the proceedings on the basis of non-existent and factually incorrect facts and reasons without application of mind and without verification of the facts available on record, then the proceedings initiated under Section 147/148 are not sustainable in law. The same are set aside and consequential reassessment order is quashed.
4. The assessee was not served any notice sent by post as per the assessment order u/s 148, 142(1) and section 144 etc., before completion of the reassessment proceedings u/s 144/148 of that act, serving of notice u/s 144 is mandatory before completion of the order under that section, failure of that renders the assessment order also invalid ab-intio. The ground was also raised before the Hon'ble CIT(A), however the same remained un-adjudicated by him
In view of above, your honors are humbly requested to quash the assessment order passed u/s 144/148 by the Id. AO being highly biased, invalid due to factually incorrect reasons resorted for reopening reassessment proceeding and for non-service of notice before completion best judgment order and oblige.”
On the other hand, the ld DR has vehemently supported the order of the A.O.
7 ITA 1377/JP/2019 _ Kana Ram Kumawat Vs ITO 10. We have considered the rival contentions and carefully perused the material placed on record. According to the facts of the present case, the reassessment proceedings were initiated for the reasons that the assessee did not file his ITR. In this respect, our attention was drawn to the page No. 3 of the ld. CIT(A)’s order wherein the contention of the A.O. for issuing notice U/s 147 and completing the assessment U/s 144 of the Act have been written and we also reproduce the same as under: "In the case the assessee has not filed his ITR declaring total income u/s 139(1)/139(4) of the IT Act, 1961 for assessment year 2008-09 and filing of ITR has not been found from the AST system subsequently, the then AO issued notice u/s 148 of the IT Act on 25.03.2015.”
In this context, the ld. AR specifically submitted that the ITR in the present case was filed on time and the assessee had also obtained tax audit report and the report so filed was also processed and refund was granted by the department which is duly posted in 26AS by the department. However, despite that it is the factual position, the present proceedings were initiated on the reasons that the assessee did not file his ITR. The assessee has also relied upon the decision/judgment of Hon’ble Rajasthan High Court in the case of CIT Vs Shree Rajasthan Syntax Ltd. (2008) 313 ITR 231 (Raj) on the point that the A.O. had issued
8 ITA 1377/JP/2019 _ Kana Ram Kumawat Vs ITO notice in a mechanical manner without verifying the correctness of the information received by him.
Apparently, the A.O. has failed to discharge the obligation cast upon him by the Statute by verifying the correctness of the information before initiating the proceedings.
Before issuing a notice U/s 148 of the Act, the ITO must have either reasons to believe that by reason of the omission or failure on the part of assessee to make a return for any assessment year to the Income tax Officer or to disclose fully or truly all material facts necessary for assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year.
The records regarding filing of ITR is accessible on line as refund granted to the assessee for the assessment year under review, without information of ITR filed by him clearly indicated in Form No. 26AS, copy of which is enclosed, had the A.O. taken due
9 ITA 1377/JP/2019 _ Kana Ram Kumawat Vs ITO care to verify the facts before reaching to the above reasons, there could have been not valid reasons for reopening the case U/s 147/148 of the Act. As such the whole proceedings are illegal in the facts and circumstances of the case, therefore, we are of the view that unless the requirement of clause (a) and (b) of Section 147 are satisfied, the ITO has no jurisdiction to issue a notice U/s 148 of the Act. The important safeguard provided in Sections 147 and 151 of the Act were lightly treated by the A.O. as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance. Considering the totality of facts and circumstances, the order passed by the A.O. and the ld. CIT(A) are set aside and the impugned proceedings U/s 147 of the Act stands quashed and resultantly, the demand of tax stands deleted.
In the result, this appeal of the assessee is allowed. Order pronounced in the open court on 16th August, 2021.