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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, “C” BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.481-485/Ahd/2017 िनधा�रण वष�/Asstt. Years: (2006-2007 to 2010-11) Bhumika Navinbhai Patel, I.T.O, L/H of Navinbhai Punjabhai Patel, Vs. Ward-2(2), 1, Priya Park Society, Baroda. Ellora Park, Baroda. PAN: ACSPP2440D
(Applicant) (Respondent)
Assessee by : Shri K.P. Singh, A.R Revenue by : Shri Lalit P. Jain, Sr. DR सुनवाई क� तारीख/Date of Hearing : 20/03/2019 घोषणा क� तारीख /Date of Pronouncement: 08/04/2019 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeals have been filed at the instance of the Assessee against the separate orders of the Commissioner of Income Tax (Appeals)-5, Ahmedabad [Ld.CIT (A) in short] of even dated 04/11/2016 arising in the matter of assessment orders passed under s.143(3) r.w.s 147of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years (AYs) 2006-2007 to 2010-2011.
ITA nos.481 to 485/2017 Asstt. Years 2006-07 to 2010-11 2
First we take up ITA No.481/Ahd/2017 for A.Y. 2006-07. The assessee has raised following grounds of appeal. 1. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer has erred in assuming jurisdiction u/s. 147 when he has no reason to believe that income has escaped the assessment. 2. Even otherwise, the assessing officer has erred in passing order u/s. 147 in the name of the dead person when assessee has died on 02.02.2013 while assessment order was passed on 31.03.2014. 3. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer by sustaining the addition of Rs. 1,72,1007- out of the total addition of Rs. 1,96,1007-on account of alleged income from undisclosed sources. 4. It is therefore prayed that the above addition made by assessing Officer and confirmed by learned Commissioner of Income-tax (Appeals) may please be deleted. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.
The assessee in the first ground of appeal has challenged the validity of the assessment framed under section 147 of the Act on the ground that there was no reason to believe that the income of the assessee has escaped assessment.
The learned AR for the assessee at the time of hearing did not advance any argument on the issue raised in ground No. 1 of appeal. Therefore we dismiss the same.
The assessee in the second ground of appeal has challenged the validity of the assessment framed under section 147 of the Act on the ground that it was made on the dead person.
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At the outset the learned AR before us submitted that the assessment framed under section 147 of the Act is not sustainable as it was made on the dead person.
On the other hand, the learner DR vehemently supported the order of authorities below.
We have heard the rival contentions and perused the materials available on record. At the time of hearing a query was posed to the learned counsel for the assessee whether the notice under section 143(2) under the Act was issued before the death of the assessee. The learned counsel for the assessee conceded the fact that the statutory notice under section 143(2) was issued before the death of the assessee. It is the settled law that the proceedings under section 143(3) of the Act cannot become fatal if the notice was issued under section 143(2) of the Act on the live person at that relevant time but died subsequently. Regarding this, we find support and guidance from the order of Hon’ble ITAT in the case of Shri Ishwar Bhai-Magan Bhai Desai Vs. ITO in ITA 90/AHD/2017 vide order dated 23-4-2018 wherein it was held as under: 7. Let me consider judgment relied upon by the ld.DR in the case of Sky Light Hospitality LLP (supra). It filed return for the assessment year 2010-11. It was converted into limited liability partnership on 13.5.2016 under Limited Liability Partnership Act, 2008. A tax evasion petition was received by the department and report was prepared. On the basis of that report, notice was issued in the name of M/s.Sky Light Hospitality Pvt.Ltd. Question arose before the Hon’ble Delhi High Court whether alleged defect in the notice of non-mentioning name of Sky Light Hospitality LLP is fatal for the assessment proceedings or not. Hon’ble High Court after referring a large number of decisions arrived at a conclusion that in fact notice was meant for Sky Light Hospitality LLP. All facts were narrated relating to this concern in the reasons recorded for reopening of the assessment. There was merely an omission or defect in the notice by not making mention of name. Thus, Hon’ble High Court has held that section 292B would take care of this aspect. The Hon’ble High Court has dismissed writ petition and upheld issuance of notice as well as reopening of the assessment. SLP of this judgment was dismissed by the Hon’ble Supreme Court. Hon’ble High Court has considered judgment referred to it with regard to impact of passing assessment in the name of deceased person. Hon’ble High
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Court concurred with these decisions and held that if assessment order was passed in the name of non-existing person, then it will be illegal. It is imperative upon me to take note of discussion made by the Hon’ble High Court:
“17. In the context of the present writ petition, the aforesaid ratio is a complete answer to the contention raised on validity of the notice under Section 147/148 of the Act as it was addressed to the erstwhile company and not to the limited liability partnership. There was no doubt and debate that the notice was meant for the petitioner and no one else. Legal error and mistake was made in addressing the notice. Noticeably, the appellant having received the said notice, had filed without prejudice reply/letter dated 11.04.2017. They had objected to the notice being issued in the name of the Company, which had ceased to exist. However, the reading of the said letter indicates that they had understood and were aware, that the notice was for them. It was replied and dealt with by them. The fact that notice was addressed to M/s Sky Light Hospitality Pvt. Ltd., a company which had been dissolved, was an error and technical lapse on the part of the respondent. No prejudice was caused.
Petitioner relies on Spice Infotainment Ltd. vs. Commissioner of Service Tax, (2012) 247 CTR 500. Spice Corp. Ltd., the company that had filed the return, had amalgamated with another company. After notice under Section 147/148 of the Act was issued and received in the name of Spice Corp. Ltd., the Assessing Officer was informed about amalgamation but the Assessment Order was passed in the name of the amalgamated company and not in the name of amalgamating company. In the said situation, the amalgamating company had filed an appeal and issue of validity of Assessment Order was raised and examined. It was held that the assessment order was invalid. This was not a case wherein notice under Section 147/148 of the Act was declared to be void and invalid but a case in which assessment order was passed in the name of and against a juristic person which had ceased to exist and stood dissolved as per provisions of the Companies Act. Order was in the name of non-existing person and hence void and illegal.
Spice Infotainment Ltd.(supra) refers to decision of Allahabad High Court in Sri Nath Suresh Chand Ram Naresh v. CIT, (2006) 280 ITR 396 (All). We have examined the decision in Sri Nath Suresh Chand Ram Naresh (supra) and would observe that facts were peculiar. There was oral partition of the Hindu undivided family, M/s Munna Lal Moti Lal, on death of the “Karta”, Moti Lal. Capital was divided amongst three brothers, who were the coparceners. Controversy was regarding legality of oral partition that was not recognized by the Revenue. Re- assessment notices were issued, in the name of M/s Sri Nath Suresh Chand Ram Naresh, Karta Shri Nath. “Nil” return was filed along with letter stating that no business was conducted in the name of the assessee and notices were wrongly issued. Revenue had asserted that this notice was meant to assess M/s Munna Lal Moti Lal though the notice was to another assessee, who was also existing in law. Recording this factual matrix, the notice under Section 148 and assessments made were held to be invalid.
Commissioner of Income Tax v. Dimension Apparels Private Limited, (2015) 370 ITR 288 (Del) and Commissioner of Income Tax v. Intel Technology India (P.) Ltd., (2016) 380 ITR 272 (Kar) follow the ratio and decision in the case of Spice
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Infotainment Ltd. (supra), as assessment orders had been passed in the name of the non-existing assessee. These cases are therefore distinguishable.
Our attention was drawn to Parashuram Pottery Works Co. Ltd. v. ITO, Circle I, Ward A, Rajkot, (1977) 106 ITR 1 (SC) which records that the Assessing Officer entrusted with the task of calculating and realising tax should familiarise themselves with the relevant provisions and become well versed with the law on the subject. This is a salutary advise. Indeed there have been lapses and faults resulting in the present litigation. Notice under Section 147/148 of the Act was issued at the end of the limitation period. Noticeably, Assessment Order for the assessment year 2013-2014 was passed on 31.03.2016, one year earlier. Second lapse is also apparent. Despite correctly noting the background, notice under Section 147/148 of the Act was not addressed in the correct name and even the PAN Number mentioned was incorrect. Nevertheless, human errors and mistakes cannot and should not nullify proceedings which are otherwise valid and no prejudice had been caused. This is the effect and mandate of Section 292B of the Act.”
A perusal of paragraph-17, 18, 19 of the above judgment would indicate that they are in favour of the assessee in the case before me. The assessee is not harping upon any irregularity in the notice, rather he is challenging the very jurisdiction over the assessee, on account of issuance of notice in the name of a deceased person, and further, even after coming to know about status of the assessee as a deceased, passing of an assessment order in the name of deceased person would not be sustainable. Therefore, I allow this ground of appeal and quash the assessment order. Consequently, I do not deem it necessary to adjudicate other issues on merit. 9. In the result, appeal of the assessee is allowed.
In view of the above, we hold that the proceedings under section 143(3) of the Act cannot become invalid in the given facts and circumstances. Therefore we do not find any reason to disturb the finding of the learned CIT- A. Hence the ground of appeal of the assessee is dismissed.
The 3rd issue raised by the assessee is that the Ld. CIT (A) erred in confirming the order of the AO by sustaining the addition of Rs. 1,72,100/- on account of income from undisclosed sources.
Briefly stated facts of the case are that the assessee is an Individual and filed its ROI declaring total income of Rs. 99,870/- as income from the
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business. The assessee in the year under consideration has deposited a certain sum as detailed under: Name of the bank, F.Y. Mode of deposit Tortal account no. & account holder’s details Cash Cheque/Transfer SB account 2005-06 25199 171000 196100 no.09860100007725 with Bank of Baroda, Dasrath Branch, Dasrath in the name of
10.1 The assessee on the question by the AO failed to explain the source of deposit. Therefore the AO treated the same as income from undisclosed sources and added to the total income of the assessee.
Aggrieved legal heir of the assessee preferred an appeal before the Ld. CIT (A). The legal heir of the assessee before the Ld. CIT (A) submitted that she could not submit the evidence during the assessment proceedings due to the demise of the assessee.
The assessee himself was looking at the accounts and banking transactions, and after the demise of the assessee many times assessee’s daughter approached the bank to seek the details, but the bank refused to give the details.
Moreover, the AO has not given sufficient time to produce the evidence as the assessment was time barring.
ITA nos.481 to 485/2017 Asstt. Years 2006-07 to 2010-11 7
The assessee further submitted that the assessee was an agriculturist and derived his income from agriculture activities. The assessee further submitted that the land was taken from the relatives for the cultivation. Accordingly, the assessee claimed that the cash was deposited for Rs. 25,100/- in saving bank account from the sale of agriculture produce and the same has been treated as agriculture income.
14.1 The assessee also submitted that the “Peak Credit and Telescoping Theory” was not considered by the AO while passing the assessment order even though these are recognized under the Income Tax Laws. Accordingly, the assessee requested to apply the peak credit theory.
The Ld. CIT (A) after considering the submission of the assessee made certain observations as detailed under:
15.1 The document produced/submitted could also be produced/submitted very well at the time of the assessment proceedings. Hence the assessee did not establish that he was prevented by sufficient cause to produce any evidence before the AO.
15.2 The AO did not consider the debit entries of cash while making the assessment. As such in several judgments, it was decided that only peak credit should be taken. Accordingly, it was noted that assessee has peak credit of Rs. 1,100/- only in his accounts. Hence the addition of Rs. 1,100/- on account of peak credit is upheld and balance addition of Rs. 24,000/- is deleted on account of cash balance.
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15.3 The assessee did not produce any pieces of evidence in respect of cheque received from various parties either as a loan or as repayment of a loan or for payment towards the sale of the residential house.
15.4 The assessee has failed to discharge the onus to prove the identity, creditworthiness, and genuineness of the relevant transaction. Hence the addition made by the AO of Rs. 1,71,000/- on account of income from undisclosed sources is upheld.
In view of the above the ld. CIT-A upheld the order of the AO in part.
Being aggrieved by the order of the ld. CIT-A, the assessee is in appeal before us.
The Ld AR before us submitted that the income should be determined on the basis of the peak credit theory as there are frequent deposits and withdrawals in the bank.
On the contrary, The Ld. DR before us submitted that vehemently supported the order of authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates to the cheques deposited by the assessee in the saving bank account. The learned AR requested to apply the peak credit theory with respect to the cheques deposited and issued from the bank. However, we note that the assessee failed to furnish the details of the parties who have deposited the cheque in his bank account. Similarly, the assessee also failed to furnish the details of the party to
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whom he issued the cheques. Thus in the absence of sufficient documentary evidence about the details of the parties, it is not possible to ascertain the nature of the transactions. Accordingly, we are not impressed with the argument of the learned counsel for the assessee.
19.1 The peak credit is applied where the assessee can correlate the deposits viz a viz withdrawal from the bank. As the assessee failed to establish the correlation between the deposit of cheques as well as cheques withdrawn from the bank. Therefore we are reluctant to apply the peak credit theory in the given facts and circumstances. Thus, we do not find any reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed
Coming to the other appeals of the assessee 482/AHD/2017, 483/AHD/2017, 484/AHD/2017 and 485/AHD/2017
At the outset, we note that the issues such involved in the aforesaid appeals of the assessee are identical to the issues raised by the assessee in ITA No. 481/AHD/2017 which we have decided in favor of the Revenue and against the assessee vide paragraph number 19 of this order. Therefore respectfully following the same, we uphold the order of the learned CIT-A.
21.1 Hence the grounds of appeal raised by the assessee in all the appeals are dismissed.
ITA nos.481 to 485/2017 Asstt. Years 2006-07 to 2010-11 10
In the result, the grounds of appeal of the assessee are dismissed.
In the combined result, all the appeals of the assessee are dismissed.
Order pronounced in the Court on 08/04/2019 at Ahmedabad.
-Sd- -Sd- (RAJPAL YADAV) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 08/04/2019 manish