VARUN GUPTA,MEERUT vs. ITO,WARD-2(4), MEERUT
Before: MS. MADHUMITA ROY, & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA, A.M:-
This appeal by the assessee is preferred against the order of the NFAC, Delhi dated 25.01.2024 for A.Y 2012-13. 2. The grounds raised by the assessee read as under:
“1. That the notice issued u/s 148 is barred by limitation and is illegal and bad in law, hence the assessment proceedings are void-
ITA No. 1215/DEL/2024 [A.Y. 2012-13]
ab-initio and the assessment order passed under this, also stands void.
2. That the Ld. A.O. and Hon'ble CIT(A) has erred in observing on order that "the assessee did not file any explanation of the source for the investment detected by the department and he failed to reply show-cause notice issued by the department" and dismissed the appeal. Both Ld. AO and Hon’ble CIT(A) ignored assessee's reply given earlier which is illegal and uncalled for.
3. That on the basis of facts and circumstances of the case, the Ld. AO and Hon'ble CIT(A) has erred in adding a sum of Rs.
84,00,000, just not to produce creditors in the returned income as unexplained and observations made, inferences drawn and findings recorded in this regard are uncalled for, arbitrary and illegal.
4. That the order passed 144/147 on 19-11-2019 is bad in law.
5. That based on the facts and circumstances of the case, Ld.
AO and Hon'ble CIT(A) has erred while recording reasons for issue of notice u/s 148(2), whereas the basis on which he formed his basis are incorrect facts and bad in law.
7. That the appellant reserves his right to raise any additional grounds, evidences and case laws at the time of hearing read with rule 46A of Income Tax Act.”
Briefly stated, the facts of the case are that the assessee originally filed his Return of income for the year under consideration on 03.03.2013 by declaring a total income of Rs. 4,03,738/-. Subsequently,
ITA No. 1215/DEL/2024 [A.Y. 2012-13]
the assessee was issued a notice under section 148 of the Income-tax
Act, 1961 [the Act, for short] dated 28.03.2019 regarding an investment of Rs. 77,00,000/- in immovable property. The assessee was issued and served another notice u/s 148 dated 05.08.2019. The assessee sought the reasons recorded which was supplied to the assessee on 19.08.2019. 4. The Assessing Officer in his reason recorded for reopening the assessment states that the AO received an information regarding purchase of property for Rs 77 lakh during FY 2011-12 and to verify the same, he had issued a notice u/s 133(6) dated 30.01.2019 which was not responded to. Further, as per his record, the assessee had not filed any return hence he formed a belief that the investment of Rs 77 lakh has escaped assessment.
5. In the course of reassessment proceedings, the AO found that the assessee has not filed any reply and due to non-response, the Assessing
Officer passed an order u/s 147 r.w.s 144 of the Act, by making an addition of Rs. 84 lakh u/s 69 as unexplained investment on the ground that lenders were not produced before him.
6. The assessee subsequently filed an appeal before the CIT(A)/NFAC
Delhi but the CIT(A)/NFAC passed an order u/s 250 of the Act who confirmed the addition made.
ITA No. 1215/DEL/2024 [A.Y. 2012-13]
8. Before us, the ld. counsel for the assessee vehemently stated that the notice issued u/s 148 of the Act dated 28.03.2019 is defective as the address is incomplete and hence the notice was never served upon the assessee. The ld. counsel for the assessee stated that though the Assessing Officer has the complete address of the assessee on the sale deed as well as in the income tax return, he had issued the notice on incomplete address which could not be served, which fact was intimated to the Assessing Officer. It is further say of the ld. counsel for the assessee that the second notice issued u/s 148 dated 05.08.2019 is time barred as reflected from the e-portal dated 04.10.2019. 9. The ld AR vehemently submitted that the assessee had submitted before the AO various details of the loans taken and its confirmations alongwith the ITRs and bank statements of the lenders for making the investment in the aforesaid property. The ld AR stated that the assessee discharged its onus of explaining the loans and the AO without making any verification of the identity, genuineness and creditworthiness of lenders asked the assessee to produce the lenders.
9. Per contra, the ld. DR submitted that the Assessing Officer had some information of investment made in a property. The AO attempted
ITA No. 1215/DEL/2024 [A.Y. 2012-13]
to make inquiry by issuing notice u/s 133(6) which was not responded to. The ld DR submitted that even during the course of assessment proceedings the assessee did not submit any evidences to prove the investment.
We have heard the rival submissions and have perused the relevant material on record. We find that that the first notice u/s 148 dated 28.03.2019 was issued at the address of Varun Gupta, S/o Shri Vinod Gupta, Saket, Meerut. The assessee claims that this notice was not served within prescribed time. The second notice u/s 148 dated 05.08.2019 was issued at the address of Varun Gupta, S/o Late Vinod Gupta, B-7, Saket, Meerut. This second notice, along with the notice dated 28.03.2019, was served on the assessee and thereafter the assessee participated in the re-assessment proceedings by filing the return and furnishing replies/documents as sought for.
We find that the assessee has argued that while the 1st notice was not served within time because of incomplete address, the 2nd notice u/s 148 which was served on him, was time barred as the notice should have been served within prescribed time i.e., 31.03.2019. We find this argument not sustainable. The provisions of section 148 prescribes
ITA No. 1215/DEL/2024 [A.Y. 2012-13]
service of notice but it is section 149(1)(b) which prescribes the time limit for issuance of notice u/s 148 of the Act. As per section 149(1)(b) notice u/s 148 of the Act should be issued before elapse of six years from the end of the relevant A.Y. In the instant case, we find that the assessee has purchased the immoveable property on 12.12.2011 and the case pertains to A.Y 2012-13. Therefore, as per section 149(1)(b), notice u/s 148 of the Act can only be issued before the end of six years i.e.
31.03.2019. In the case in hand, admittedly, the first notice was issued on 28.03.2019 which was within the prescribed period. The assessee subsequently received this notice along with notice dated 05.08.2019. To emphasize, we find that whereas section 148 enjoins the AO must serve the notice to the assessee, in stark contrast, the provisions of section 149 speaks only of issuance of notice within the prescribed period. Section 149 does not mandate that the such a notice must also be served on the assessee within the prescribed period as held by the hon’ble juri ictional High Court in the case of Mayawati V CIT (2010)
321 ITR 349 (Del).
As far as issuance/service of the 1st notice is concerned, we further find that the assessee has participated in the reassessment proceedings and therefore the provisions of section 292BB of the Act will apply. In ITA No. 1215/DEL/2024 [A.Y. 2012-13] this context, the hon’ble Supreme Court in Commissioner of Income- Tax vs. Laxman Das Khandelwal AIR 2019 Supreme Court 3926 held as under: “According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.” It was similarly held by the hon’ble Delhi High Court in the case of Pr. Commissioner Of Income Tax-1 vs M/S Consortium Nussli Comfort Net dated 25 March, 2022. Applying the aforesaid law on the subject in the instant case, we find that there is proper issuance of notice from the AO and there was active participation of the assessee in the reassessment proceedings. We are therefore, of the view that the notice u/s 148 was validly issued on 28.03.2019, within the prescribed period u/s 149(1)(b), though served subsequently and the consequent reassessment proceeding were legally undertaken. The ground no 1 is accordingly dismissed.
ITA No. 1215/DEL/2024 [A.Y. 2012-13]
13. Further the assessee has raised a ground that the reasons recorded by the AO do not bear any date, hence the same can not be considered has having been recorded before the issue of Notice u/s 148 dated
28.03.2019. We are of the view that the assessee has raised a suspicion but has not substantiated the same with any cogent evidence. From the materials/documents on record, we find that the reasons recorded for the reopening is available on record. The AO has recorded the reasons for reopening that the assessee did not respond to the notice u/s 133(6) with regard to verification of the information regarding purchase of immovable property. The facts of the investment in property is correctly mentioned. We therefore hold that the notice u/s 148 is validly issued after proper recording of reasons. We also find that the AO has proceeded to make the assessment in the manner provided u/s 144 of the Act by following the process of giving opportunity by service of notice and calling the assessee to show cause regarding assessment to be made. Accordingly, Ground No. 4 and 5 are dismissed.
As far as merits of the case is concerned, we find that the assessee has made an investment in property for Rs 84 lakh, including stamp duty of Rs 7 lakh, during FY 2011-12. In the course of reassessment
ITA No. 1215/DEL/2024 [A.Y. 2012-13]
proceedings, the assessee submitted before the AO that the property was purchased out of loan taken from various persons as follows:
i) M/s Bhagwati Builders
Rs 23,00,000/- ii) Suman Gupta
Rs 6,60,000/- iii) Smt Deepi Gupta
Rs 4,00,000/- iv) Smt Shruti Agarwal
Rs 6,00,000/- v) Smt Varsha Agarwal
Rs 6,00,000/- vi)Smt Kamakshi Jindal
Rs 3,00,000/- vii) Sunil Kumar Gupta
Rs 6,00,000/- viii) Deepak Jindal
Rs 3,00,000/- ix) M/s V K Gupta HUF
Rs 8,00,000/-
Apart from the above, the assessee submitted that he had obtained small loans from 6 more individual person totaling to 15 lakh. We find that the assessee had submitted various details of each of the loans taken and its confirmations alongwith the ITRs and bank statements of the lenders for making the investment in the aforesaid property. We further find that the AO made the addition only on the ground that the assessee has not produced all the lenders for verification without pointing out any defect/discrepancy in the documents/evidences submitted by the assessee. We are of the considered view that where the AO was having any doubts on the lenders, he should have pointed out discrepancy in the bank accounts of ITA No. 1215/DEL/2024 [A.Y. 2012-13] the assessee/lenders before insisting on their production before him. The AO should have carried out further investigation by issuing notices u/s 133(6)/131 to the lenders. In such factual matrix, we are of the view that where the assessee has discharged his initial onus of furnishing explanation regarding the loans and the identity, genuineness and creditworthiness of lenders, the AO, when the onus was shifted to him, has failed to discharge the same by not making any independent verification to dislodge the claim of the assessee. Having failed to do so, the AO was not legally permitted to consider the loans as unverifiable and the investment made in property as unexplained investment u/s 69. In view of the discussion made above, we set aside the order of the CIT(A) and direct the AO to delete the addition of Rs 84 lakh. The ground 2 and 3 are allowed. 16. In the result, the appeal of the assessee in ITA No. 1215/DEL/2024 is partly allowed. The order is pronounced in the open court on 20.06.2025. [MADHUMITA ROY]
[NAVEEN CHANDRA]
JUDICIAL MEMBER
ACCOUNTANT MEMBER
Dated: 20th JUNE, 2025. VL/
ITA No. 1215/DEL/2024 [A.Y. 2012-13]
Page 11 of 11