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Facts
A search action on Santosh Group of Institutions revealed that the assessees (Jagdish Prasad and Dr. Sarvesh Kumar) had paid capitation fees in cash. Based on this information, the Assessing Officer (ACIT, Circle 57(1), New Delhi) reopened the assessment under Section 147/148 and made an addition under Section 69C, which was sustained by the CIT(A). The assessees filed appeals challenging the additions and the jurisdiction of the AO.
Held
The Tribunal condoned the delay in filing the appeals. It was found that the reassessment proceedings were initiated by an AO (ACIT, Circle 57(1), New Delhi) who lacked proper jurisdiction, as the actual jurisdiction lay with another AO (Range 14, Ward 1(5), Meerut at Baraut), and no transfer order was on record. Consequently, the assessment order was quashed due to jurisdictional defect, and other grounds of appeal were kept open.
Key Issues
Whether the assessment order passed by a non-jurisdictional Assessing Officer was valid; Whether the assessment should have been initiated under Section 153C instead of Section 147; Whether the delay in filing appeals should be condoned.
Sections Cited
132, 132(4), 148, 147, 143(3), 69C, 151, 153C, 127, 124
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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’: NEW DELHI
(Assessment Year: 2008-09) Dr. Sarvesh Kumar, vs. ACIT, Circle 57 (1), C/o DS Legal & Associates, Delhi. B-50, LGF, South Extension II, New Delhi – 110 053. (PAN : AKWPK5639H) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Santanu Jain, Advocate Shri Dipanshu Jain, Advocate Shri Parteek Kumar, Advocate REVENUE BY : Shri Sanjay Kumar, Sr. DR Date of Hearing : 12.03.2025 Date of Order : 04.06.2025 O R D E R
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The assessees, Jagdish Prasad and Dr. Sarvesh Kumar, have filed appeals against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld.
CIT(A)”, for short] dated 20.06.2023 & 12.05.2023 for the Assessment Year 2008-09 respectively.
At the time of filing of appeal, it was noticed that that appeals filed by Jagdish Prasad and Dr. Sarvesh Kumar are time barred by 4 days and 38 days respectively. In response thereof, the Assessee has filed an application seeking condonation of delay in filing of the appeal on the grounds mentioned in the application for condonation of delay. In support of this, they filed an affidavit which is placed on record. Accordingly, they prayed that the delay in filing the appeals be condoned.
I have heard the counsels on the issue of condonation of delay. In my considered opinion, there was a reasonable cause for the delay in filing the appeals. Therefore, I condone the delay in filing the appeals before the Tribunal.
Since the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order. I take the appeal being in the case of Jagdish Prasad as the lead case.
Brief facts of the case are, in both the cases, I observed that AO i.e. ACIT, Circle 57(1), New Delhi has received a letter from DDIT, Inv. Unit-V, Jhandewalan Extension, New Delhi-110055 as per which a search and seizure action under section 132 of the Income-tax Act, 1961 (for short ‘the Act’) was carried out on 27.06.2013 in Santosh Group of Institutions and Dr. P. Mahalingam. During the abovesaid search, certain documents were seized which revealed the receipt of donations/ capitation fees over and above the regular course fees paid in cash by the parents of the students for taking admissions in various medical courses. Dr. P. Mahalingam, Chairman of the abovesaid Trust recorded the statement u/s 132(4) of the Act and categorically admitted of accepting the donations/capitation fees in cash and offered the unaccounted money so received for taxation in the relevant assessment year. Based on the informations recovered from Santosh Group of Institutions, it was found that Dr Sarvesh Kumar and Jagdish Prasad had paid capitation fees and regular fees in cash. Based on the above information, the AO issued notice u/s 148 of the Act after recording the satisfaction that income had escaped assessment after obtaining approval from appropriate authorities. During assessment proceedings, the AO asked the assessee to submit the relevant information. After considering the submissions of the assessee, the AO heavily relied on the information received from Investigation Wing and accordingly proceeded to make the addition u/s 69C of the Act and added the income to the extent of capitation fees paid in cash.
Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A) and filed grounds of appeal
and detailed submissions. After considering the submissions of the assessee, ld. CIT (A) sustained the addition.
7. Aggrieved with the above order, assessee is in appeal raising following grounds of appeal and also raised additional ground of appeal :-
“1. That the action taken u/s 147/143(3) of the Income Tax Act and consequent assessment framed. as upheld by Ld. CJT(A) is vitiated without jurisdiction and contrary to law. 1.1 That the action taken and the assessment so framed on the basis of documents found and seized during the course of search u/s 132 of the Income Tax Act, 1961 in the premises of M/s Santosh Medical College & Dr. P. Mahalingam or the statement recorded behind the back of the appellant of a third party is invalid and required to be quashed as no jurisdiction lies u/s 1471148 of the Act.
2. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the action of Ld. Assessing Officer in framing the impugned assessment order u/s 147/143(3) of the Act and that too without assuming jurisdiction as per law and without complying with the mandatory conditions of Section 147 to 151 of the Income Tax Act, 1961. 2.1 That the assessment order passed u/s 147/143(3) of the Act is bad in law as no tangible material has come to the knowledge of the Assessing Officer. The Ld. Assessing Officer has merely relied upon the information received from the Deputy Director of income Tax (Investigation)- Unit-V which is nothing but a borrowed satisfaction. 2.2 That the Ld. Assessing Officer has not recorded any reason by using his independent application of mind to show that he has a "reason to believe" that the income has escaped assessment and as such the same are not valid in the eyes of law. 2.3 That reasons recorded are based upon presumption and guess work and these are not more than reason to suspect and thus are not valid in the eyes of law as no belief can be formed on the basis of such reasons recorded. 2.4 That the re-opening of the assessment is bad in law for the reason that the sanction granted u/s 151 of the Act is not valid in the eyes of the law and the same is mechanical and has been done without independent reasoning and application of mind by the sanctioning authority.
3. That having regard to facts and circumstances of the case, the Ld. CIT(A) has erred in facts and on law in upholding the order of Ld. AO as the jurisdictional Assessing Officer of the Assessee is ITO, Ward 70( 1), Delhi instead of ACIT, Circle-57(1), Delhi who has passed the assessment order, as such the assessment order passed is illegal and without jurisdiction, which is liable to be quashed.
4. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in upholding the action of Ld. Assessing Officer in making an addition of Rs.32,50,000/- on account of unexplained expenditure u/s 69C of the Act and that too by recording incorrect facts and findings and without observing the principle of natural justice. 4.1 That in any case and in any view of the matter, action of Ld. CIT(A) in upholding the action of Ld. Assessing Officer in making an addition of Rs.32,50,000/- on account of unexplained expenditure, is bad in law and against the facts and circumstances of the case. 4.2 That the Ld. Assessing Officer has failed to show through any cogent/tangible material that any or whole amount of Rs.32,50,000/- was actually paid on account of capitation/donation amount in cash for the admission of his son during the year under consideration to Santosh Medical College or Dr. P. Mahalingam and thereby making the addition suffers from perversity besides being unjust and uncalled for. 4.3 That the Ld. CIT(A) and Ld. Assessing Officer has fallen in gross error in making the addition of Rs.32,50,000/- in the hands of the appellant as any credit found in the books of account of the third party namely M/s Santosh Medical College is neither in his name nor any part thereof is a payment made by him during the year under consideration. 4.4 That the Ld. CIT(A) and Ld. Assessing Officer has failed to confront the said incriminating material to the Assessee and also did not even provide an opportunity to cross-examine the Chairman of the Trust namely Dr. P. Mahalingam, which is against the principle of natural justice and thus no addition could be made as income in the hands of appellant on the basis of such unreliable material/evidence. 4.5 That the assessment so framed and. upheld and addition made suffers from perverse findings and is contrary to the facts on record and the same needs to be set aside.
5. That the levy of interest under the Act is disputed and as such unsustainable in law besides being excessive.”
ADDITIONAL GROUND : That having regard to facts and circumstances of the case, the Ld. CIT(A) has erred in facts and on law in upholding the order of Ld. Assessing Officer as the jurisdictional Assessing Officer of the Assessee is ITO, Ward 1 (5), Meerut at Baraut instead of ACIT, Circle-57(1), Delhi who has passed the assessment order, as such the assessment order passed is illegal and without jurisdiction, which is liable to be quashed.
Considered the rival submissions and material placed on record. I observed that the issue raised by the assessee in additional ground goes to the root of the matter challenging the jurisdictional issue. In the light of Hon’ble Supreme Court in the case of NTPC, Limited vs. CIT (1998) 229 ITR 383 (SC), I am inclined to admit the additional ground and take up the same for adjudication herein below.
At the time of hearing, ld. AR submitted that the case of the assessee was reopened based on the information received from Investigation Wing and the AO has recorded the satisfaction heavily relying on the above informations. He submitted that the AO has merely borrowed the satisfaction without recording the satisfaction based on the information available on record. He further submitted that AO has heavily relied on the material found during search in the case of Santosh Group of Institutions and he submitted that AO should have initiated the proceedings u/s 153C of the Act instead of initiating the proceedings u/s 147 of the Act. In this regard, he relied on the decision of Shiv Charan dated 13.06.2018. He submitted that the facts are exactly similar to the facts in the present case.
Further, with regard to additional ground raised
by the assessee, ld. AR submitted that the present AO i.e. ACIT, 57(1), New Delhi has initiated the proceedings and completed the assessment. However, he submitted that the actual jurisdiction of the assessee lies with Range 14, Ward 1 (5), Meerut at Baraut. He submitted that the reassessment proceedings should have been initiated by the jurisdictional AO instead of the present Assessing Office i.e ACIT, Circle 57 (1), New Delhi without proper jurisdiction.
11. On the other hand, ld. DR of the Revenue heavily relied on the findings of the lower authorities and submitted that the proceedings were initiated properly after getting the proper approvals from the respective authorities. Further the assessee also participated in the re-assessment proceedings and now they cannot raise the additional ground at this stage.
12. Considered the rival submissions and material placed on record. I observed that the AO received information from Investigation Wing that assessee is one of the parents of the students who has paid capitation fees to the medical college in cash. Before me, assessee has raised jurisdictional issue on initiation of proceedings u/s 147 of the Act instead of section 153C of the Act. After considering the submissions, I am inclined to dismiss the same with the observation that the Revenue has got liberty to choose the method of assessment based on the information available before them.
Coming to the issue of jurisdiction of the AO, I observed that the present AO has received the information from Investigation Wing and after recording the satisfaction, he proceeded to complete the reassessment proceedings heavily relying on the material available on record. At the time of hearing, it was submitted that the actual jurisdiction of the assessee lies with Range 14, Ward 1 (5), Meerut at Baraut. No records were brought to my notice that the present AO has got the jurisdiction to complete the assessment on the basis of any order u/s 127 or section 124 of the Act. In absence of any material on the issue of jurisdiction acquired by the present AO who has completed the assessment, as per the record brought to my notice the actual jurisdiction of the assessee lies with Range 14, Ward 1 (5), Meerut at Baraut. Therefore, the reassessment proceedings should have been initiated and concluded by the JAO of the assessee. Therefore, the reassessment proceedings initiated by the AO, Circle 57(1), New Delhi is without jurisdiction. Therefore, the initiation of completion of assessment is bad in law. Accordingly, the same is quashed and the additional ground raised by the assessee is allowed.
Since I have quashed the assessment order on the jurisdictional issue, the other grounds raised
by the assessee were not adjudicated at this stage. These are kept open.
15. In the result, the appeal filed by the assessee is partly allowed.
16. Since the facts are exactly similar to the case of Dr. Sarvesh Kumar, my above findings in the case of Jagdish Prasad are applicable mutatis mutandis in the case of Dr. Sarvesh Kumar in . Accordingly, the appeal filed by Dr. Sarvesh Kumar being is partly allowed. 17. In the result, both the appeals filed by the assessees are partly allowed. Order pronounced in the open court on this 4TH day of June, 2025.