SWAMINS ORNAMENTS,PILIBHIT vs. INCOME TAX OFFICER-2(5), PILIBHIT

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.297/LKW/2025 Assessment Year: 2017-18 Swamins Ornaments v. The Income Tax Officer 2(5) JP Road Pilibhit - 2 Pilibhit (U.P) TAN/PAN:ADCFS8344N (Applicant) (Respondent) Applicant by: Shri Rakesh Garg, Advocate Respondent by: Shri Amit Kumar, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 24.02.2025, passed by the Addl/JCIT(A), Aurangabad for Assessment Year 2017-18.

2.0 The brief facts of the case are that the assessee was a partnership firm, consisting of two partners namely Smt. Kanchan Agarwal and Shri Kamla Agarwal, having 70% and 30% share respectively and was trading in Jewellery. The assessee e- filed its return of income for the year under consideration on 25.10.2017, declaring a total income of Rs.7,16,100/- in the status of Firm. The case of the assessee was selected for Complete Scrutiny under Computer Aided Scrutiny Selection (CASS). During the course of assessment proceedings, the Assessing Officer (AO) issued statutory notices along with

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questionnaire, in response to which the assessee had furnished replies with supporting documents. The AO noticed that during the demonetization period, i.e., from 09.11.2016 to 30.12.2016, the assessee had made cash deposits of Rs.2,07,00,000/- in its Bank Account No.36115203993, maintained with the State Bank of India, Pilibhit. The assessee was asked to furnish the details of month-wise cash deposits/cash sales/opening and closing cash in hand and other details along with documentary evidence and details of purchases and sales, vide notices under section 142(1) of the Act. In response to notices under section 142(1) of the Act, the assessee filed replies and relevant documents. The assessee was again asked to explain abnormal high sales during the month of October, 2016 and first eight days of November, 2016. The assessee, vide reply dated 03.12.2019, submitted as under:

"As asking by your good self about high sales in any business, it is submitted that sales depends on many factors in any business. When we discuss our trade sales depends on market demands in marriage seasons, festive seasons or latest and designer collection of jewellery at any jewellery showroom. However trade of jewellery is also depending on quality, purity and believes of the customers on the seller. Volume of sales and number of customers are also not in the hands of the assessee in competitive market. Thus latest and designer collection of jewellery in that period was liked by

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our customers which results high sale in the month of November, 2016. It is also bring to notice of your honour that customer's feedback and satisfaction is main key for success of business. It is luck of assessee that customers were satisfied with latest collection of jewellery in that period. In view of this submission it is prayer to your honour that please accept the sales of the assessee. Copies of sales voucher/bills are enclosed herewith four your kind perusal". 2.1 After considering the reply of the assessee, the AO estimated the cash sales of the assessee at Rs.18,72,007/- per month and worked out the abnormal sales made by the assessee at Rs.1,37,73,020/-. The AO computed the gross profit earned by the assessee @ 15% which came to Rs.20,65,953/- (Rs.1,37,73,020 X 15/100) and the same was added to the total income of the assessee. Further, the AO also disallowed 20% of the expenses of Rs.1,19,902/- debited by the assessee under the head “Repair & Maintenance and Miscellaneous”, which came to Rs.23,980/- and added the same also to the income of the assessee. The AO completed the assessment under section 143(3) of the Act, assessing the total income of the assessee at Rs.28,06,030/-.

2.2 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee and confirmed the order of the AO.

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2.3 Now the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

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admission of Additional Ground. It was submitted that the Additional Ground being sought to be admitted was essentially a legal ground which went to the very root of the matter and was germane to the entire assessment proceedings. For a ready reference, this Ground is being reproduced hereunder:

5.0 Per contra, the Ld. Sr. D.R. opposed assessee’s prayer for admission of the Additional Ground and submitted that in this case, Notice under section 143(2) of the Act was issued on 21.09.2018 and served upon the assessee and during the course of assessment proceedings, the assessee had duly participated in the proceedings and had furnished various submissions along with necessary details and relevant documents from time to time and, therefore, in view of assessee’s participation and assessee’s failure to object to the assessment proceedings before the AO, the Additional Ground should not be admitted.

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6.0 After having heard both the parties, it is my considered view that this Additional Ground being sought to be admitted by the Ld. A.R. is purely a legal ground and irrespective of the assessee’s participation and lack of objection during the course of assessment proceedings, the valuable right of the assessee to raise this purely legal ground cannot be taken away and, therefore, I admit the same for the purpose of adjudication.

7.0 The Ld. A.R. submitted that the Notice issued under section 143(2) of the Act, vide dated 21.09.2018, was not issued in accordance with the Instructions issued by the CBDT vide F.No.225/157/2017/ΙΤΑ.II dated 23.06.2017 and, therefore, the assessment framed was lacking jurisdiction and the same deserved to be quashed. He drew my attention to the copy of Notice filed along with the application for admission of the Additional Ground and also Note on e-proceedings accompanying the Notice. He also drew my attention to paragraph 3 of the Instruction dated 23.06.2017 bearing F.No.225/157/2017/ΙΤΑ.II wherein vide paragraph 3 it has been ordained that all scrutiny Notices under section 143(2) of the Act were henceforth to be issued in the revised format only. It was submitted that since the impugned Notice was not in the revised format, as was apparent from the copy of Notice enclosed, the assessment was liable to be quashed. He also placed reliance on numerous

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orders of various Benches of ITAT wherein assessments had been quashed by the ITAT as the Notice under section 143(2) of the Act had not been issued in proper format.

8.0 Per contra, the Ld. Sr. D.R. submitted that the impugned Notice was a computer generated Notice and the AO had no authority to modify the contents of the said Notice and, therefore, in terms of the provisions contained in section 292B of the Act, the Notice was a valid Notice and any defect in such Notice would not make the assessment proceedings void ab initio. He submitted that the Additional Ground raised by the assessee should be dismissed and the appeal should be heard on merits.

9.0 I have heard the rival submissions and have also perused the material on record. It is seen that the issuance of Notice under section 143(2) of the Act in proper format is a jurisdictional requirement and any defect therein goes to the very root of the assessment proceedings. A Notice issued in violation of specific provision cannot confer jurisdiction on the AO to proceed with the scrutiny assessment. In the present case, it is apparent that the impugned Notice dated 21.09.2018 is not in the proper format and, therefore, in my considered view, it is invalid and unenforceable in law. Undisputedly, the impugned Notice has been issued in violation of the binding CBDT Instruction F.No.225/157/2017/ΙΤΑ.II dated 23.06.2017 which

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is binding on all the Income Tax Authorities. It is very much clear from paragraph 3 of the above said Instruction that all the scrutiny Notices under section 143(2) of the Act would have to be henceforth issued in the revised format only. In the present appeal before me, the AO did not issue the Notice in the prescribed revised format and this is a direct violation of CBDT’s binding Instruction. Accordingly, I have no option but to hold the impugned Notice to be bad in law and liable to be quashed. Accordingly, the Notice is quashed and the resultant proceedings are also quashed.

10.0 Since the assessee has already been granted relief on the issue of validity of Notice issued under section 143(2) of the Act, the grounds raised by the assessee in support of merits of the case have become of academic interest only and the same are dismissed as such.

11.0 In the final result, the appeal of the assessee stands partly allowed.

Order pronounced in the open Court on 08/05/2026.

Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:08/05/2026 JJ:

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