SANTOSH MAHALINGAM,GHAZIABAD vs. ACIT, CENTRAL CIRCLE-6, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI TARVINDER SINGH KAPOOR, ACCOUNTANT MEMBER & SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA No.283/Del/2020 [Assessment Year : 2014-15] Santosh Mahalingam, vs ACIT, No.1, Santosh Nagar, Pratap Central Circle-6, Vihar, Ghaziabad-201009. New Delhi. PAN-CJKPS5766C APPELLANT RESPONDENT Appellant by Shri S.K.Gupta, CA Respondent by Shri H.K.Choudhary, CIT. DR Date of Hearing 30.06.2022 Date of Pronouncement 03.08.2022

ORDER PER CHANDRA MOHAN GARG, JM : This appeal filed by the assessee against the order of Ld. CIT(A)-24, New Delhi dated 14.10.2019 in Appeal No.112/2016-17 for the assessment year 2014-15.

Application of assessee dated 24.06.2022 for admission of additional ground and filing of revised Ground No.1 2. The Ld. Authorized representative [“AR”] of the assessee submitted that the assessee carves for leave to add two additional grounds of appeal for admission and adjudication and also wants to file revised Ground No.1 raised in Form No.36.

already on record. Placing reliance on the judgments of Hon’ble Supreme Court in the cases of National Thermal Power Co.Ltd. vs CIT 229 ITR 383 (SC) and Jute Corporate of India Ltd.v s CIT 187 ITR 688 (SC), Ld.AR submitted that additional grounds may kindly be admitted for adjudication and revised regular Ground No.1 may also be taken on record.

Additional Ground No.1: “The impugned assessment is invalid and without jurisdiction as the said assessment is completed without complying with mandatory legal requirements of the provisions of section 143(2) of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed. ” Additional Ground No.2: "On the facts and circumstances of the case and also in law, the impugned assessment order passed by the Ld AO u/s 143(3) of the Act is invalid and void-ab-initio for want of valid notice u/s. 143(2) as per law as evident from fact that when return in response to notice was admittedly fled on 26.10.2015, the notice u/s. 143(2) is issued on very same day i.e. 26.10.2015 which shows non application of mind in issuing notice u/s. 143(2) and thereafter assuming jurisdiction to frame assessment on the basis of such a notice is not tenable in law and therefore impugned proceedings need be quashed.”

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Additional Ground Nos. 1 & 2

Additional Ground Nos.1 and 2 “In the present case, the power to make assessment u/s 143(3) was assumed by the AO by issue of notice u/s 143(2) firstly on 29.09.2015 (PB 9) along with notice dt: 29.09.2015 u/s 142(1) of IT Act (PB 8). The above notice was issued by the AO without having return of income in its possession which fact is proved from the above notice dt: 29.09.2015 (PB 8) where the AO requires the assessee to file the return of income in appropriate form as required in rule 12. For that purpose a blank return of income was also enclosed. Subsequently, the appellant filed letter dt: 26.10.2015 with the copy of the acknowledgment of return. The assessing officer immediately on 26.10.2015 issued notice u/s 143(2) of

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the Act of the same date. Issue of such a notice through which jurisdiction is assumed on the date of intimation of return shows that the notice has been issued mechanically without application of mind. To support the above proposition of law, reliance is placed in the decisions of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del), Micron Enterprises Pvt Ltd vs ITO ITA No.901 /Del/2016 dt: 14.05.2018 (SMC Bench) and Astech Industries Pvt Ltd vs DCIT ITA No.2332/Del/2018 dt: 20.12.2018 (DB) is relevant on the identical facts, the Hon’ble ITAT quashed the reassessment proceeding, reliance is placed in the decisions of Shri Harsh Bhatia vs. ITO ITA No. 1262 and 1263/Del/2017 df: 17.10.2017, Satish Kumar vs ITO ITA No.3586/Del/2018 dt: 14.01.2019, M/s. Castleton Capital Ltd. Vs ACIT in ITA No.495/Del/2017 dt: 27.09.2019 and M/s DUrga Ferrous ITA No.672/Del/2019 vide order dt: 13.02.2020.” 8. Ld.AR submitted that the AO proceeded to make assessment u/s 143(3) of the Act by issuing notice u/s 143(2) of the Income Tax Act, 1961 (“the Act”) firstly, on 29.09.2015 along with notice dated 29.09.2015 u/s 143(2) of the Act. Ld.AR vehemently pointed out that the said notices were issued by the AO without having copy of return of income in its possession which is clear from the copy of the notice dated 29.09.2015 wherein the AO requires the assessee to file the return of income in prescribed format enclosing a copy of blank return form. Ld.AR further explained that the assessee filed letter dated 26.10.2015 with the copy of the acknowledgement of e-filing of return of income [assessee’s Paper Book Page-10] by Acknowledgement No.416775821221114 on 22.11.2014. Ld.AR submitted that immediately after receipt of letter filed by the assessee dated 26.10.2015 submitting the copy of acknowledgement of return of income. The AO on the very same date i.e. 26.10.2015 issued notice u/s 143(2) of the Act without having original or 4 | P a g e

copy of the return of income and without perusing the material or applying his mind to the return of income. Placing reliance on the decision of Hon’ble Jurisdictional High Court of Delhi in the case of Director of Income Tax vs Society for Worldwide Interbank Financial Telecommunications [2010] 323 ITR 29 (Del.), Ld.AR submitted that the notice u/s 143(2) of the Act can be served after AO examining the return of income filed by the assessee and when immediately after receiving the copy of acknowledgement of e-filing of return of income on 22.11.2014 and without perusing original or copy of the return of income for AY 2014-15, the AO issued notice u/s 143(2) of the Act to the assessee. Therefore, in view of the said judgement of Hon’ble Jurisdictional High Court in the case of Director of Income Tax vs Society for Worldwide Interbank Financial Telecommunications (supra) and the order of “A” Bench of ITAT, in the case of Astech Industries Pvt. Ltd. Vs DCIT in ITA No.2332/Del/2018 dated 20.12.2018, the AO did not assume valid jurisdiction to frame assessment u/s 143(3) of the Act therefore, impugned assessment order as well as first appellate order may kindly be quashed.

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22.11.2014 therefore, the judgement of Hon’ble Jurisdictional High Court is not applicable in the present case in favour of the assessee.

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income for the assessment year 2009-2010 on 29.09.2009 declaring income of Rs.339,85,750/- and the same was processed u/s 143(1) of the Act on 19.02.2011. Later on, certain information as mentioned in assessment order was received from Investigation Wing regarding search and survey action of Surender Kumar Jain and his brother Virendra Jain and it was reported by Investigation Wing to the AO that they were engaged in business of providing accommodation entries allegedly through certain companies. On the basis of said Investigation Wing information, reopening was made u/s 148 of the Act by the AO vide notice u/s 148 of the Act dated 28.03.2016. In response to the same, admittedly return was filed by letter dated 27.04.2016 which is specifically acknowledged by AO in assessment order at Para 2 of the assessment order. Notably, said return is expressly accepted by AO as valid return for purposes of assessment u/s 148 of the Act. As mentioned in assessment order itself, when the said return was taken on order sheet by AO vide order sheet entry dated 27.04.2016, at same time, notice u/s 143(2) of the Act was issued on very same date that is 27.04.2016 which is one of the major issue on which validity of the assessment is challenged before us. Copy of this return and notice u/s 143(2) of the Act dated 27.04.2016 are placed on records before us. We further note that AO supplied the reasons recorded (without approval) to assessee (as placed in paper book before us) which were objected before the AO in detailed manner vide objection letter dated 27.04.2016 in which note worthy aspect is assessee specifically sought from AO copies of back material referred in reasons including investigation wing report/letter, seized documents etc referred therein, AO without confronting any back material as evident from objection disposal order dated 17.05.2016 rejected assessee’s objection challenging reopening action. In various letters placed in paper book and referred in written submission before us, it was specifically asked to AO during assessment proceedings to confront the back material as referred in reasons recorded namely in letters dated 07/06/2016, 20/10/2016 which request of assessee has not been adverted to by the AO is patent from objection disposal order dated 17/05/2016 and further notices dated 8 | P a g e

09/08/2016 u/s 142(1) and show cause notice dated 13/10/2016. In none of these notices as placed in paper book, we could find the back material being confronted to assessee as specifically requested by assessee. We note here that the Tribunal in various decisions specially one which is referred by Ld counsel for the assessee extensively in case of Moti Adhesives (ITA 3133/Del/2018) in order dated 25/06/2018 copy placed before us, has been consistently holding while taking support from Hon’ble Apex court leading decision in Andaman Timber Industries case (Civil Appeal No. 4228 OF 2006) reported at 127 DTR 241 that violation of principle of natural justice (here withholding of back material referred in reasons which is specifically requested for repeatedly) is a serious flaw and results in nullity of the order so passed, which is squarely applicable to present case. Be that as it may, even on merits, for the companies from where assessee recd. share capital assessee placed before Ld AO in its reply dated 07/06/2016 all evidences like share application form, board resolution confirming investment made, confirmation of share capital raised, Share certificate, income tax particulars of share holders, bank statement of share holders and form 2 for allotment of shares along with their audited final a/c thus discharging its primary burden u/s 68 on three ingredients of identity, creditworthiness and genuineness of share holders. AO unimpressed by the same in the only show cause notice which is placed in paper book is dated 13/10/2016 where only thing asked by AO is to produce the directors of those share holder companies. For mere non production of said shareholders without anything more, as evident from pages 6 & 12 even though summon issued u/s 131 have been accepted to be served on them in the assessment order adverse inference u/s 68 of the Act is drawn by AO to make addition of Rs 185,00,000 which is impugned here before us. In first appeal, before Ld CIT(A) confirmed the order of the AO has rejected assessee’s detailed submissions challenging reopening action u/s 148 of the Act and while confirming the addition made by AO it is very glaring from ld CIT(A)’s order page 16 that primary reason which has weighed on him to confirm said addition is mere non production of share holder companies directors in person. In this 9 | P a g e

background, the assessee is before us challenging the orders of the authorities below. 7.1 At the outset Ld counsel for the assessee has drawn our attention to the additional ground application filed before us in terms of Rule 11 of ITAT rules. In said additional ground application it is stated as under: “ Quote Additional ground of Appeal “That impugned assessment order passed by Ld. Assessingofficer u/s 147/143(3) of the Act is invalid and void ab initio for want of valid notice u/s 143(2) as per law as evident from fact that when return in response to notice u/s 148 was admittedly filed on 27/04/2016 notice u/s143(2) is issued on very same day that is 27/04/2016 which shows non application of mind in issuing notice u/s 143(2) and thereafter in framing the assessment and accordingly all proceedings are nullity” 7.2 We note that the aforesaid additional ground in identical facts is accepted and assessment u/s 143(3) of the Act was quashed by the ITAT and Hon’ble High Court, are mentioned herein below: i) Hon’ble Delhi ITAT in case of Micron Enterprises Pvt. Ltd. Vs.ITO in I.T.A .No. 901/DEL/2016 (A.Y .2006-07) order dated 14/05/2018 ii) Hon’ble Delhi ITAT in Harsh Bhatia case ITA Nos. 1262/& 1263/DEL/2017 [A.Ys. 2008-09 & 2009-10] Order dated 17.10.2017 iii) Hon’ble Delhi High Court in the case of Director of Income Tax Vs. Society for Worldwide Inter Bank Financial, Telecommunications in ITA No. 441/2010, reported at 323 ITR 249 iv) Section 292BB & Section 143(2) are both dealt succinctly in Delhi High Court decision in case of Silver Line reported at 383 ITR 455 wherein it has been held as under:- 10 | P a g e

“…12. The Court first proposes to consider the question as to whether in terms of the proviso to Section 292BB of the Act, the Assessee was precluded, at the stage of the proceedings before the ITAT, from raising a contention regarding failure of the AO to issue a notice under Section 143(2) of the Act. The legal position appears to be fairly well settled that Section 292BB of the Act talks of the drawing of a presumption of service of notice on an Assessee and is basically a rule of evidence. In Commissioner of Income Tax v. Parikalpana Estate Development (P.) Ltd. (supra) in answering a similar question, the Court referred to its earlier decision in Commissioner ITA No. 578 of 2015 & connected matters Page 10 of 15 of Income Tax v. Mukesh Kumar Agrawal (2012) 345 ITR 29 (All.) and pointed out that Section 292BB of the Act was a rule of evidence which validated service of notice in certain circumstances. It introduces a deeming fiction that once the Assessee appears in any proceeding or has cooperated in any enquiry relating to assessment or reassessment it shall be deemed that any notice under any provision of the Act that is required to be served has been duly served upon him in accordance with the provisions of the Act and the Assessee in those circumstances would be precluded from objecting that a notice that was required to be served upon him under the Act was not served upon him or not served in time or was served in an improper manner. It was held that Section 292BB of the Act is a rule of evidence and it has nothing to do with the mandatory requirement of giving a notice and especially a notice under Section 143(2) of the Act which is a notice giving jurisdiction to the AO to frame an assessment. The decision of the Allahabad High Court in Manish Prakash Gupta v. Commissioner of Income Tax (supra) is also to the same effect.”

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7.3 While arguing on above additional ground application, Ld. counsel for the assessee has drawn our attention to written submission filed in paper book of 218 pages (from page 1 to 27) that as noted in impugned assessment order at pages 5&6 that notice u/s 143(2) of the Act was issued on 27/04/2016 on return submitted u/s 148 of the Act vide order sheet entry dated 27/04/2016, (copy of return u/s 148 letter dated 27.04.2016 and notice u/s 143(2) dated 27/04/2016 are at pages 5&6 with additional ground application), in view of Jurisdictional Delhi High Court decision in case of Society for worldwide reported at 323 ITR 249 followed in identical set of facts by Delhi ITAT in case of Micron Enterprises Pvt Ltd vs ITO in ITA 901/Del/2016 dated 14/05/2018 (copies enclosed in additional ground application at pages 12 to 24) and in view of no contrary jurisdictional High Court decision, we request that extant orders of AO and Ld CIT(A) may be quashed on this short count itself. The logic behind this proposition is patent non application of mind and undue haste on part of AO in issuing notice at same time when return u/s 143(2) of the Act is filed as admitted in order itself, which is sine qua non u/s 143(2) of the Act which uses the phrase “if considers it necessary or expedient”, and on expression “considers it necessary” we draw our kind attention to Hon’ble Apex Court decision in case of Bhikubhai Patel vs State of Gujarat (4 SCC 144) relevant extract of which is reproduced below for sake of ready reference (which directly fits in extant facts to support proposition put forth): “…24. Proviso opens with the words where the State Government is of opinion that substantial modifications in the draft development plan and regulations are necessary..These words are indicative of the satisfaction being subjective one but there must exist circumstances stated in the proviso which are conditions precedent for the formation of the opinion. Opinion to be formed by the State Government cannot be on imaginary grounds, wishful thinking, however, laudable that may be. Such a course is impermissible in law. The formation of the opinion, though subjective, must be based on the material disclosing that a

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necessity had arisen to make substantial modifications in the draft development plan. 25. The formation of the opinion by the State Government is with reference to the necessity that may have had arisen to make substantial modifications in the draft development plan. The expression: so considered necessary is again of crucial importance. The term consider means to think over; it connotes that there should be active application of the mind. In other words the term consider postulates consideration of all the relevant aspects of the matter. A plain reading of the relevant provision suggests that the State Government may publish the modifications only after consideration that such modifications have become necessary. The word necessary means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessary must be construed in the connection in which it is used. (See-Advanced Law Lexicon, 3rd Edition, 2005; P. Ramanatha Aiyar) 26. The formation of the opinion by the State Government should reflect intense application of mind with reference to the material available on record that it had become necessary to propose substantial modifications to the draft development plan.” 7.4 Ld. Counsel for the assessee also stated that there is no application of mind in present case what to speak of intense application of mind where notice u/s 143(2) is ostensibly prepared before hand or hand in hand at same time when return u/s 148 is filed on 27/04/2016, hence, he requested to quash the assessment. 7.5 On careful consideration of the entire conspectus of the case, as per Hon’ble Supreme court ruling in case of National Thermal Power Corporation Ltd Vs CIT [(1998) 229 ITR 383 SC)], we admit the additional ground raised above by the assessee being purely legal in nature on basis of material on records. Once the decks are clear from admission of purely legal additional ground , we now turn our attention to the adjudication of the same which should not detain us for long in view of 13 | P a g e

Delhi ITAT decision in case of Micron Enterprises Pvt. Ltd.(supra) which has decided the identical issue in favour of assessee by relying on Hon’ble Delhi High Court in the case Society for Worldwide Inter Bank Financial, Telecommunications supra. We are reproducing the reasoning from ITAT decision in case of Micron Enterprises Pvt. Ltd.(supra) on which no contrary decision is brought to our attention: “Learned Counsel for the Assessee submitted that assessee filed reply to the notice under section 148 of the I.T. Act on dated 26.11.2013 which is noted in the assessment order, copy of which, is filed at page-11 of the paper book, in which, assessee explained that the return already filed under section 139(1) may be treated as return filed in response to notice under section 148 of the I.T. Act. He has submitted that on the same day A.O. issued notice under section 143(2) i.e., on 26.11.2013, copy of which, is filed at page-12 of the paper book. He has, therefore, submitted that the A.O. has not validly assumed jurisdiction under section 147 and 143(3) of the I.T. Act to pass the assessment order against the assessee. He has submitted that the issue is covered in favour of the assessee by the judgment of the Hon’ble Delhi High Court in the case of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del.) in which it was held as under : “Both the CIT(A) and the Tribunal have returned a concurrent and clear finding of fact that the notice under s. 143(2) was issued on 23rd March, 2000 and since the return was filed on 27th March, 2000, the notice was not a valid one and, therefore, the assessment completed on the basis of the notice was also invalid and was consequently set aside. It is for the first time that the counsel for the appellant contends that the notice, in fact, was issued on 27th March, 2000 and not on 23rd March, 2000, the date which is recorded on the notice itself. No such contention was raised before the lower appellate authorities. Consequently, the said contention cannot be raised before the Court for the first time. The appellant has stated that the return was filed by the assessee on 27th March, 2000 and the notice 14 | P a g e

under s. 143(2) was served upon the Authorized Representative of the assessee by hand when the Authorized Representative of the assessee came and filed return. However, the date of the notice was mistakenly mentioned as 23rd March, 2000. Assuming the aforesaid to be true, the notice was served on the Authorized Representative simultaneously on his filing the return which clearly indicates that the notice was ready even prior to the filing of the return. The provisions of s. 143(2) make it dear that the notice can only be served after the AO has examined the return filed by the assessee. Whereas it is dear that when the assessee came to file the return, the notice under s. 143(2) was served upon the Authorized Representative by hand. Thus, it would amount to gross violation of the scheme of s. 143(2).” 5.1. And the conclusion is as under : “Assessment made in pursuance of a notice under section 143(2) issued on 23rd March, 2000 when the return was filed on 27th March, 2000 is invalid.” 6. He has submitted that the same order have been followed by ITAT, Delhi Bench, in the case of Shri Harsh Bhatia, New Delhi vs. ITO, Ward-50(3), New Delhi in ITA.No.1262 and 1263/Del./2017 dated 17.10.2017 in which the Tribunal held as under : 10. “It was further argued by the ld. counsel for the assessee Dr. Rakesh Gupta that notice u/s 143(2) of the Act, was issued on 17.09.2014 and which is the same date on which return was filed. This is apparent from the Assessing Officer’s order in para 3 at page 1. Therefore, the Assessing Officer has not applied his mind independently while issuing notice u/s 148 of the Act. On this count also, the assessment deserves to be quashed. Accordingly, under the facts and circumstances of the case, the legal grounds of the assessee are allowed.” 7. On the other hand, Ld. D.R. submitted that assessee did not file return under section 148 within the specified period. Therefore, this ground of appeal of assessee may be dismissed. 8. After considering the rival submissions, I am of the view that the issue is covered in favour of the assessee by the Judgment of Hon’ble Delhi High Court in the case of Director of Income Tax vs. Society for 15 | P a g e

Worldwide Interbank Financial Telecommunications (supra) and Order of ITAT, Delhi Bench in the case of Shri Harsh Bhatia, New Delhi vs. ITO, Ward-50(3), New Delhi (supra). It is an admitted fact that assessee filed reply in response to the notice under section 148 of the I.T. Act on 26.11.2013 and submitted before A.O. that original return filed before him may be treated as return filed in response to the notice under section 148 of the I.T. Act. The A.O. on the same day served notice under section 143(2) upon assessee- company whose signature tally on the said notice. Therefore, notice issued under section 143(2) is invalid and resultantly, the assessment is vitiated and is liable to be quashed. I, accordingly, set aside the orders of the authorities below and quash the reassessment proceedings in the matter. Resultantly, all additions stands deleted. In view of the above, there is no need to decide other contentions raised by Learned Counsel for the Assessee. 9. In the result, appeal of assessee is allowed.” 7.6 Further we also find force in argument of Ld counsel for the assessee that language of section 143(2) of the Act in so far as it uses the phrase “if considers it necessary or expedient” presupposes application of mind on part of Ld AO before notice u/s 143(2) of the Act is issued which words have been explained by Hon’ble Apex court in case of Bhikubhai Patel vs State of Gujarat (4 SCC 144) relevant extract of which is reproduced above where it is observed by Hon’ble Apex court that “…The expression: so considered necessary is again of crucial importance. The term consider means to think over; it connotes that there should be active application of the mind. In other words the term consider postulates consideration of all the relevant aspects of the matter. A plain reading of the relevant provision suggests that the State Government may publish the modifications only after consideration that such modifications have become necessary. The word necessary means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessary must be construed in the connection in which it is used. (See-Advanced Law Lexicon, 3rd Edition, 16 | P a g e

2005; P. Ramanatha Aiyar)..” which fits in present case fully. Guided by these felicitous observation of Hon’ble Supreme court we have no hesitation in our mind in accepting the legal plea raised by Ld AR before us and thus holding that notice u/s 143(2) issued at same time and date of return filing u/s 148 ( vide order sheet entry dated 27/04/2016) vitiates the entire exercise and accordingly all subsequent proceedings are held to be invalid in eyes of law and therefore we quash the orders passed by AO and Ld CIT(A) and allow additional ground raised by assessee.” 13. In view of the above issuing notice u/s 143(2) of the Act on 26.10.20115 and without having original or copy of the return of income filed by the assessee for AY 2014-15 and vitiates the entire assessment proceedings. Accordingly, respectfully following the judgement of Hon’ble Jurisdictional High Court of Delhi in the case of Director of Income Tax vs Society for Worldwide Interbank Financial Telecommunications (supra), impugned assessment order has to be held invalid being passed without complying with the mandatory provisions of section 143(2) of the Act. Therefore, we quash the orders of AO and Ld.CIT(A) and allow the additional Ground Nos. 1 & 2 raised by the assessee. 14. Since in the earlier part of the order, we have allowed legal Ground Nos. 1 & 2 of the assessee therefore, grounds of assessee on merits have become infructuous and we are not adjudicating the same as having become infructuous. 15. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 03rd August, 2022. Sd/- Sd/- (TARVINDER SINGH KAPOOR) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER 17 | P a g e

* Amit Kumar *