SUMAN BHAT,BANGALORE vs. INCOME-TAX OFFICER, INTERNATIONAL TAXATION, WARD-1(1), BENGALURU

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal by assessee is directed against order of ld. CIT(A) dated 25.7.2023. The assessee has raised following grounds of appeal:

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore 4. a). The learned CIT(A) erred in concluding that chronology of events showed that appellant had adopted dilatory tactics when the same are not true and when the delay in conduct of assessment proceedings was on account of the Department.

b) The learned CIT(A) erred in upholding order passed based on notices sent in email not responded by the appellant and notice served at the appellant's address when the person authorised to receive notices was not present in the house.

c) The learned CTT(A) erred in upholding the order stated to be based on show cause notice dated 20-12-2019, fixing the hearing on 24-12-2019, when no such notice was served on the appellant and such notice giving very short time to respond was against the principles of justice and fairplay. 5. (a) The learned CIT-A has erred in upholding the valuation of land at Rs. 108 per square feet by the A.O. ignoring the jurisdictional High Court decision in Late Smt. Krishna Bajaj #s ACIT [2014] 41 Taxmann.com 445, that A.O is not competent to do the same and guidance value cannot be the basis for determining the fair market value under the Income Tax Act, 1961 and that the AO ought to have properly referred the issue to the Valuation Cell. b) The learned CIT-A has erred in not considering the various valuations accepted by appellate authorities viz. IT AT Bangalore and the Honourable Karnataka High Court only on the ground that the appellant had not produced a valuation report.

c) The learned CIT-A ought to have considered these valuations which show that the value of the land as on 01 -04-1981 at Rs. 300 per square feet considered in the returns by the appellant was fair. d) Accordingly, the Honourable Tribunal be pleased to direct that the value of the land be adopted at Rs. 300 per square feet as considered by the appellant in his return.

b) The learned CIT (A) erred in not holding that the subsequent rectification order u/s. 154 nvs 155(15) dated 31-03-2021 could not have been passed if the reference was made under Section 5 5 A.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore c) The learned CIT(A) has erred in stating in her order that these technical objections to valuation were not brought up before the A.O or the valuation officer when the facts are quite to the contrary.

The Honourable Tribunal accordingly hold that the reference made by the AO under Section 50C was bad in law and that the valuation report received pursuant thereto are- not binding on the AO and cannot be acted upon by him in making any rectification to the order under Section 143(3).

b) The learned CIT(A) erred in ignoring the objections vide letter dated 04-01-2021 to the Respondent when he proposed to give effect to the Valuation Officer's report in holding that no objections have been made on the valuation before the AO.

c) The learned CIT-A has erred in upholding a valuation based on a methodology contained in the Guidelines for Valuation of Immovable Property issued by the CBDT in 2009 which is relevant for establishing the minimum value for the purposes of valuation under the Wealth Tax Act, 1987 and Income Tax Act, 1961 for detection of under valuation and in particular valuation under Section 50C for justifying sale consideration below the stamp duty value. d) Without prejudice to the above the learned CIT-A has failed to take into consideration that the DVO has only determined the minimum cost of construction of Apartment No 1 and Apartment No 8 and that many costs which go into the "cost of acquisition" were not considered by the learned DVO.

e) The learned CIT-A ought to have directed the A.O to pass fresh order u/s. 154 after considering the objections of the appellant contained in his letter dated 04-01-2021 as prayed For by the appellant in the response to the remand report in the interests of justice and fairplay.

The Honourable Tribunal accordingly direct that the cost of acquisition of Unit No 1 at Rs. 1,40,70,820 and investment in Unit 8 at Rs.Rs2,57,00,00 as furnished by the appellant be accepted

1.1 The assessee has raised following additional grounds of appeal: 1. The learned A O has erred in valuation of the land at Rs 108 per square feet as on 01-04-1981. stated to be based on guidance value during 1981-82. when there was no guidance value notified for levy of stamp duty by the Government of Karnataka for that year.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore

1.2 We have heard the both the parties on admission of additional grounds. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above ground. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional ground for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide.

a) Deduction/Exemption from capital gains b) Capital gains/loss on sale of property

2.1 The notice u/s 143(2) of the Act dated 13.08.2018 was served on the assessee. During the previous year relevant to the A.Y, 2017-18, the assessee had earned income from house property, capital gains and income from other sources. The assessee along with his family members had demolished the existing residential house at

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore

Site No.20/1 (Old No.20), Ali Asker Road, Bangalore - 560052 and constructed an apartment complex consisting of 10 apartments. The assessee received two apartments out of the 10 apartments by a deed of family settlement entered into on 02.01.2016. The assessee was allotted Apartment No.l on the ground floor and Apartment No.8 on the third floor of the building named Mahogany. Later the assessee sold the Apartment No.l vide sale deed dated 21.10.2016 for a total consideration of Rs.4,26,66,749/-. The assessee claimed exemption u/s 54F in respect of Apartment No.8 which had been retained by him. The assessee submitted the following computation of capital gain from the sale of Apartment no.l: Computation of capital gain from sale of Apartment No.l

.. Particulars Apt. Built Up Total (Rs.) Land Area No. Area {Sq. Ft.) (Sq. Ft.)

Name of the Buyer: Mr. Bellad 1 2399 1045 Date of Sale: 21.10.2016 4,26,66,749 a) Total Sale Consideration b) Consideration of land @ 24,000/- per Sq. Ft. 2,50,80,000 1,75,86,749 c) Building (a-b) Long term capital gain on sale of land 2,50,80,000 d) Consideration of land i.e., 1045 Sq. Ft. 35.26,875 e) Indexed Cost (Value as on 01.04.1981 = Rs.300/Sq. Ft) -1045 Sq. Ft. 2,15,53,125 (f) Long Term Capital Gain (d-e) Exemption u/s 54F 2,57,00,000 g) Costof New Flat (Completed 15.12.2016) Apt. No.8 Built up Area - 3424 Sq. Ft. (3424 x 17,300/10.764) 2,20,85,938 h) Exemption allowed u/s 54F i) Taxable Long Term Capital Gain (f-h) (-) 5,32,813 Short Term Capital Gains on Construction - Apt. No.l Built-Up Area - 2399 1,75,86,749 j) Consideration for building k) Cost of Construction 1,40,70,820 35,15,929 l) Short Term Capital Gain (j-k)

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore

2.2 From the computation, of capital gain, the AO noted that the assessee had claimed cost of construction for Apartment No.l of Rs.1,40,70,820/- at the rate of Rs.5,865/- per Sq. Ft. (Rs. 1,40,70,820/2399). Similarly, the assessee had claimed cost of Construction for Apartment No.8 of Rs.2,57,00,000/- at the rate of Rs.7,506/- per Sq. Ft. (Rs.2,57,00,000/3424). Further, the assessee had claimed cost of land @ 300 per Sq. Ft. in the year 1981, since the assessee had not submitted any supporting documents in respect of the cost of acquisition in the year 1981 as well as the cost of construction in the year 2016, the AO issued a notice u/s 133(6) of the Act to the sub-registrars to obtain the following details:

2.3 The Sub-Registrar, Indiranagar, Bangalore furnished the guidance value of the land as Rs.108/- per square foot during 1981-82. In response to the other notice, the Sub-Registrar, Shivajinagar, also furnished the guidance value of the cost of construction as Rs.1,608/- per Sq. Ft. for the F.Y.2016-17. The AO noted that there was a huge difference between the cost adopted by the assessee in respect of land and construction and the guidance value furnished by the Sub-Registrars. Accordingly, the case was referred by the AO to the District Valuation Officer (DVO) u/s 50C read with section 55A of the Act 19 to ascertain the Fair Market- Value of the apartments. However, the report of

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 7 of 30 the DVO was not received till the date of completion of the assessment. Hence the AO considered the cost of acquisition and cost of construction as per the guidance value furnished by the Sub-Registrars. The AO adopted the revised computation of capital gain given below: Computation of capital gain from sale of Apartment No.l

Particulars Apt. Built Up Area Land Total (Rs.) No. (Sq. Ft.) Area [Sq. Ft.) Name of the Buyer: Mr. Bellad 1 2399 1045 Date of Sale: 21.10.2016 a) Total Sale Consideration 4,26,66,749 38,55,694 / Sq. m - b) Construction cost as per Sub- Registrar = 17,300 2399x17,300/10.764 c) Land Cost (a-b) 3,88,11,055 1045Sq. Ft. 3,88,11,055 d) Hence, the consideration of land i.e Guidance value of land in 1981-82 as per Sub-Registrar, Indiranagar @ 108/- / Sq. Ft. 1045x108=1,12,860 12,69,605 e) Indexed Value of Land 112860x 1125/100 3,75,41,380 (f) Long Term Capital Gain (d-e) Exemption U/s 54F 55,02,368 g) Cost of construction of Apt. No. 8 Built up Area - 3424 as per Sub-Registrar = 17,300/ Sq. m =3424 x 17,300/10.764 (3424x17,300/10.764) 54F = 48,41,393 u/s h) Exemption allowed 55,02,368/4, 26,66,749)x(3,75,4 1,380) 3,26,99,987 Net Long Term Capital Gain (f-h)

2.4 The above computation of capital gain was held to be subject to rectification, if required, once the valuation report of the DVO was received. The AO also disallowed the assessee's claim of housing loan of Rs.21,91,257/- in the absence of any documentary evidence. The

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 8 of 30 house property income was assessed @ Rs.6,50,000/-. Aggrieved the assessee has filed an appeal before ld. CIT(A).

“6. FINDINGS AND DECISION The grounds of appeal, statement of facts, the submissions made by the appellant in response to the hearing notices and the order of the Ld. AO have been carefully considered. The grounds of appeal are adjudicated as under. 6.1 Before proceeding to adjudicate the merits of the case, it is first necessary to address the technical objections raised by the appellant in Ground of appeal no. 1. The appellant has contested the validity of the notices issued by the AO u/s 143(2) and 142(1) in his case. It is seen from the record that the notice u/s 143(2) was issued by the ITO Ward 7(1) on 13.8.2018. In the said notice, it is clearly mentioned that subsequent assessment proceedings would be conducted electronically. The notice u/s 143(2} was issued through the system. The notice can only be generated and issued by the officer who has jurisdiction over the PAN, which at the time of issue of the notice was lying with the ITO Ward 7(1). The appellant had also not intimated the Department about his changed residential status and that he had moved abroad for employment. Subsequently, the notice u/s 142(1) was issued by the ITO Ward l(2)(5) as the PAN had moved to that jurisdiction. The appellant has claimed that the notices were not received by him because they went to his junk mail. This claim is difficult to countenance in the light of the appellant's subsequent submission of details in response to the notice u/s 142(1) Once the appellant informed the Department of his NRI status, the case was transferred to the International Taxation Ward and the assessment proceedings continued by that office. Since the appellant had furnished submissions in response to the notice u/s 142(1), the provisions of section 292BB would come into play. Relying on the decision in the case of CIT vs Laxman Das Khandelwal CA No.6261 -6262 of 2019, the appellant has claimed that section 292BB of the Act would not be applicable. However, the facts of that case are distinguishable. In that case, the Hon'ble Supreme Court has observed as below:

“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(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 9 of 30 In the case of Laxman Das Khandelwal, no notice u/s 143(2) had been issued whereas in the present case, as discussed above, the notices u/s 143(2) and 142(1) had been issued by the AO and the appellant had also responded to the notice u/s, 142(1). The appellant has also relied on the decision of the Apex Court in ACIT& Anr. Vs Hotel Blue Moon 321 ITR 362(SC) wherein it was held that the notice u/s 143(2) had to be served within time for a block assessment to be valid. In the present case however, the notice u/s 43(2) was served within time and hence reliance on the decision in Hotel Blue Moon does not assist the appellant's case. The chronology documented in the assessment order and in the remand report points to the appellant's deliberate disregard of the notices/communication from the Department. It is evident from the details brought out in the remand report that the appellant had avoided responding to the notices issued by the AO and only when the assessment was nearing the completion date, did he respond. Further, even when the show-cause notice was physically served at his residence, the appellant did not comply in time. The raising of technical objections by the appellant has to be seen in the context of the appellant's dilatory tactics and evidently confrontationist approach during the assessment proceedings and further, during the rectification proceedings as well. In the light of the foregoing discussion, ground no. 1 is dismissed. 6.2 Ground of appeal no. 2 is allowed in favour of the appellant as in the remand report, the AO has accepted that the issue of interest on Housing Joan \vas not a reason for limited scrutiny selection and the case had not been converted to complete scrutiny. The disallowance made on this account is therefore deleted. 6.3. The remaining grounds including the additional grounds of appeal raised by the appellant all pertain to the computation of capital gains arising to the appellant from the sale of his property and are taken up together for adjudication. With regard to the computation of the long-term capital gains, the appellant has also raised technical objections. The first is that the reference made by the AO to the DVO to ascertain the cost of construction was wrongly made. Section 50C reads as follows: “50C. Special provision for full value of consideration in certain cases,— (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government {hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value gf the consideration received or accruing as a result of such transfer.”

In the present case, the cost of construction formed part of the value of the capital asset transferred, in this case Apartment No, 1, that was sold by the appellant. The appellant had claimed the fair market value of the land as on 1.4.1981 to be Rs.300 per square foot but did not provide the basis for taking this value as the f.m.v. Since the appellant had also not furnished the details of the cost of construction nor had he submitted any report by a registered valuer, the AO made a reference to the VO. The appellant has relied on the decisions

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 10 of 30 listed below in support of a higher value of land per sq. ft. than the value adopted by the AO at Rs.108/- per sq. ft based on the sub-registrar's information: a. J. R. Mrityunjay Singh (Karnataka High Court) -rate Rs.200/- per sq. ft. b. Late Smt. Krishna Bajaj vs the ACIT (Karnataka High Court)- rate Rs.167/- per sq. ft c. Naresh Bhat (HUF) vs DCIT(Bangalore 1TAT) - rate Rs. 200/- per sq. ft. d. Dr. Devika Gunasheela vs JC/TfBangalore ITAT).- rated Rs. 150/- per sq. ft. In all the above cases, either the assessee had provided a valuer's report or the location of the property was at a different location as compared with the appellant's property. Hence the rate adopted in those cases was based on the specific facts of each case. In the present case, the appellant had neither during assessment proceedings nor during appellate proceedings provided any basis for adopting the rate per sq, ft. at Rs.300/-. Hence the reliance on these decisions does not support the appellant's case. It is also noted that in response to the notice u/s 142A by the VO, the appellant participated in the valuation proceedings and the valuation report issued by the VO has considered the various objections raised by the appellant. The technical objections being raised now were not brought up either before the.AO or the VO to whom the reference had been made. Once the reference has been made u/s 55A, the report of the Valuation Officer becomes binding on the AO. Therefore, the AO proceeded to carry out the rectification under the provisions of section 155(15) of the Act. The appellant has again contested the validity of the order u/s 154, stating that the entire order including the computation sheet and the demand notice were not visible on the portal. Despite providing the appellant a copy of the rectification order dated 31.3.2021 issued with a DIN and certified by the AO, the appellant has continued to question its validity. Under the circumstances, it becomes apparent that the appellant has chosen to continuously raise technical objections when the matter has been settled on merits by reference to the Valuation Officer, In the Valuation Report, the cost of land has been taken at Rs.3,06,54,949/- as against Rs.3,88,11,055/- in the assessment order. The cost of construction has been taken as Rs. 1,20,11,800/- as against the cost of construction of Rs.38,55,694/- taken in the assessment order. The appellant has therefore got substantial relief through the rectification of the assessment order and the persistence of the grievance, in my considered opinion, is not justified. The AO is directed to adopt the values given in the Valuation Report while computing the capital gains in the appellant's case. Further, the levy of interest is consequential to the assessed income. The AO is directed to recompute the interest accordingly while giving effect to this order. In the light of the foregoing discussion, these grounds of appeal are treated as partly allowed.”

Against this assessee is in appeal before us.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 11 of 30 4. At the outset, the ld. A.R. submitted that the notice u/s 143(2) of the Act was not at all issued to the assessee by ld. AO who has framed the impugned assessment order.

4.1. Further, he submitted that the order of assessment now passed u/s 143(3) of the Act is bad in law and void- ab-initio for want of proper notices to be issued by the Assessing Officer. The assessee was residing in Ali Asker Road, Bangalore 560052 till about 2011, took temporary residence in Lavelle Road when his home was under redevelopment and later went abroad on employment in March 2014. Till 2014 he was in employment in India and had filed ITR for AY 2014-15 by which the jurisdictional officer would have been under Salary Circle, Range 3(3). After he went abroad his residential status thereafter was non-resident from Asst Year 2015-16. The ITR filed for Asst Year 2017-18 clearly showed his residential status as a Non Resident. The contention of the learned CIT-A that the assessee did not inform the Department of his shifting to Singapore is not relevant to his assessment. His home address at Ali Asker Road continues to be his permanent address for communication. On 21-5-2018, the ITO International Taxation Ward 1(1), the Respondent, had already issued a notice under Section 201(1) and 201(1A) to the buyer for not deducting tax under Section 195 as applicable to a Non Resident. Hence the Respondent has to clarify how the notice u/s 143(2) was not issued by him . However, in respect of regular assessment, Smt. Clarette Sundararajan, Income Tax Officer, Ward 7(2)(1), Bangalore issued a notice dated 13-08-2018 bearing No. ITBA/AST/S/143(2)/2018-19/1011242619(1) said to be a notice under Section 143(2) of the Income Tax Act, 1961, for Limited Scrutiny (Computer Aided Scrutiny Selection) for verification of the following issues selected for scrutiny: i) Deduction/ Exemption from Capital Gains ii) Capital Gains/ Loss on Sale of Property

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 12 of 30 He submitted that it is further not clear how Ward 7(2)(1) got access to assessee’s PAN as if at all the PAN were to “lie” with the earlier AO, it should have been lying with Salary Circle and not Circle 7(2)(1). 4.2 He submitted that the starting point of an assessment u/s 143(3) is by a notice u/s 143(2). The said notice should emanate from the Assessing Officer. Section 143(2) during 2018 read as under: “(2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:...........

4.3 Hence for a notice under Section 143(2) to be a valid notice should emanate from the Assessing officer of the assessee or the “prescribed income tax authority”. Prescribed authority under sub- section (2) of section 143 has been prescribed under Rule 12E: 12E. The prescribed authority under sub-section (2) of section 143 shall be an income-tax authority not below the rank of an Income-tax Officer who has been authorised by the Central Board of Direct Taxes to act as income-tax authority for the purposes of sub-section (2) of section 143

4.4 To the assessee’s knowledge there is no notification issued under rule 12E nominating the Income Tax Officer, Ward 7(2)(1), as the prescribed Income tax Authority for the purposes of Section 143(2). He submitted that the term Assessing officer is defined under the Section 2(7A) to mean: “(7A) "Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 13 of 30 section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;”

4.5 By virtue of the above definition for the Income Tax Officer, Ward 7(2)(1) to be called as the Assessing Officer of the assessee, the said authority should have been vested with the jurisdiction under sub-section (1) or sub-section (2) of Section 120 or any other provision of this Act over the assessee.

4.6 He submitted that as the assessee was a non-resident during the previous year the Assessing Officer could only have been an Assistant Commissioner or Deputy Commissioner or the Income-tax Officer from the International Taxation Range. Hence the assessment now made is not saved by Section 124 as this is not a case of questioning the jurisdiction of the Assessing Officer. The assessee is questioning the assessment made based on a notice u/s 143 (2) issued by the Income Tax Officer, Ward 7(2)(1) who was not vested with jurisdiction over the assessee to be called the Assessing Officer. He submitted that in paragraph 4 of the Remand Report dated 27- 12-2022 issued by the Respondent, it has been clearly observed therein that the assessee had not responded to the notice u/s 143(2) dated 13-08-2018. On this issue attention is drawn to Section 282 of the Income Tax Act, 1961 on the manner of service of notice reproduced below: Service of notice generally. 282. (1) The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as "communication") may be made by delivering or transmitting a copy thereof, to the person therein named,—

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 14 of 30 (a) by post or by such courier services as may be approved by the Board; or (b) in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or (d) by any other means of transmission of documents as provided by rules made by the Board in this behalf. (2) The Board may make rules73 providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub-section (1) may be delivered or transmitted to the person therein named. Explanation.—For the purposes of this section, the expressions "electronic mail" and "electronic mail message" shall have the meanings as assigned to them in Explanation to section 66A of the Information Technology Act, 2000 (21 of 2000).

4.7 It is clear from the above that the provisions of Chapter IV of the Information Technology Act, 2000 will govern the delivery of notices by way of electronic messages. Section 12 of the Information Technology Act,2000 is relevant for the discussion: “12. Acknowledgment of receipt.—(1) Where the originator has not stipulated that the acknowledgment of receipt of electronic record be given in a particular form or by a particular method, an acknowledgment may be given by— (a) any communication by the addressee, automated or otherwise; or (b) any conduct of the addressee, sufficient to indicate to the originator that the electronic record has been received. (2) Where the originator has stipulated that the electronic record shall be binding only on receipt of an acknowledgment of such electronic record by him, then unless acknowledgment has been so received, the electronic record shall he deemed to have been never sent by the originator. (3) Where the originator has not stipulated that the electronic record shall be binding only on receipt of such acknowledgment, and the acknowledgment has not been received by the originator within the time specified or agreed or, if no time has been specified or agreed to within a reasonable time, then the originator may give notice to the addressee stating that no acknowledgment has been received by him and specifying a reasonable time by which the acknowledgment must be received by him and if no acknowledgment is received within the aforesaid time limit he may after giving notice to the addressee, treat the electronic record as though it has never been sent.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 15 of 30 4.8 He submitted that a perusal of the notice issued under Section 143(2) enclosed in page 34 of the paper book clearly indicates that the Income Tax Officer Ward 7(2)(1) who had issued the notice had called for production of any evidence in support of the return by 29/08/2018 by 1:20 PM. In view of the specific requirement of Section 12 (2) of the Information Technology Act, 2000, having set a time limit for furnishing the information it was incumbent upon the said officer to ensure that the assessee responded to the notice within the stipulated time. The same had not been complied by the officer. In effect Section 12(2) of the Information Technology Act, 2000 came into play and the notice could be deemed never to have been issued. Effectively, the assessee has conveyed his objection to the notice by not responding to an invalid notice from an Income Tax Authority who was not his Assessing Officer. Said non response could also be considered as a communication of lack of jurisdiction under Section 124 and defect in the notice / proceedings so as to not to fall within the mischief of Section 292BB. The said officer had two options, serve the notice again by alternate mode or send a fresh notice by electronic mode till responded by the assessee. Though time was available till September 30th 2018 to ensure that the fresh notice under Section 143(2) was properly served on the assessee, the same was not done.

4.9 He submitted that it transpires rather than issue a fresh notice u/s 143(2) the Income Tax Officer Ward 7(2)(1) found that she was not the Assessing officer of the Respondent and the case was transferred to the Income Tax Officer Ward 1(2)(5). The Department itself realized that the Income Tax Officer Ward 7(2)(1) did not have jurisdiction to be considered the Assessing officer of the assessee. Therefore, the Income Tax Officer Ward 1(2)(5) ought to have issued a fresh notice under Section 143(2) on or before September 30th 2018 which was not done.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 16 of 30

4.10 He submitted that more than a year later, on 26-08-2019, the assessee received a notice u/s 142(1) dated 14-08-2019 bearing No. ITBA / AST/F /142(1) / 2019-20 / 1017397041(1) from the Income Tax Officer Ward 1 (2)(5) calling for certain particulars to be submitted on or before 21-8-2019 as per Annexure. The same is enclosed 43 to 44 of the Paper Book. It is very much clear from the passage of time between the notice under Section 143(2) and the subsequent notice under Section 142(1) that this delay was not occasioned by the assessee.

4.11 He submitted that though the present notice u/s 142(1) dated 26-08-2019 was also an invalid notice being a notice issued by an officer who did not have jurisdiction, the assessee furnished the particulars called for. In the last paragraph the assessee clearly informed the ITO Ward 1(2)(5) that “The above information is furnished without prejudice to my submission that the notice u/s 143(2) issued on 13.08.2018 and present notice u/s 142(1) are not valid notices as I am a non-resident and not issued by my AO who should be from International Taxation Range.” Hence he submitted that the assessee has duly conveyed his objection to the proceedings during its course and the proceedings could not be held to be valid under the provisions of Section 292BB as held by the learned appellate officer.

4.12 He submitted that it appears that though the assessee had indicated that he was a non-resident in his return, the notice u/s 143(2) dated 13-08-2018 had been issued by the ITO Ward 7(2)(1) who never had jurisdiction over the assessee and hence was never the Assessing Officer of the assessee. An invalid notice cannot be held to emanate from the Department. As already informed, certain proceedings relating to non-deduction of TDS under Section 195

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 17 of 30 against the buyer of Apartment No 1 had already been initiated by the ITO International Taxation Ward 1(1). Hence though the Department knew that the Assessing Officer was the International Taxation Ward 1(1), the notice under Section 143(2) was issued by the ITO Ward 7(2)(1). An invalid notice is as good as no notice issued. Absence of notice under Section 143(2) renders the assessment invalid. (See order in CA No 6261-6262 of 2019, CIT vs Laxmandas Khandelwal (SC). Only after the Income Tax Officer Ward 1 (2)(5) was informed that he had no jurisdiction as the assessee was a non- resident, the PAN was transferred to the ITO, International Taxation, Ward 1(1), Bangalore.

4.13 He drawn our attention to the recent decision of the High Court of Gujarat in Pankajbhai Jaysukhlal Shah vs ACIT & Another [2020] 425. ITR 70 (Guj). The SLP against this order has been dismissed.

4.14 He submitted that the following High Court judgements also support the assessee’s stand that a notice u/s 143(2) issued by an officer who was not the Assessing Officer is invalid and Section 292BB has no application: a) 143 Taxmann.com 207(Cal) Pr CIT vs Cosmat Traders(P) Ltd b) Asst CIT vs SK Industries 141 Taxmann.com 569 (Delhi) (SLP dismissed in 141 Taxmann.com 569 (SC))

4.15 The ld. A.R. submitted that thereafter the assessee did not hear from the Department and was under the impression that the proceedings had been dropped. The assessee after receiving the assessment order under appeal found that the notices issued by the International Taxation Ward 1(1) were in his spam folder and hence did not come to his notice. The assessee has not received any show cause notice dated 20/12/2019 fixing the hearing on 24/12/2019 to

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 18 of 30 comply as referred to in the order. A show cause notice dated 20/12/2019 fixing the hearing on 23/12/2019 was served at the assessee’s address at 20/1 Ali Asker Road. However, the date of service is not known as the assessee’s parents were not in station when it was served. It was opened on 25/12/2019. Said print out shows that the soft copy was apparently digitally signed, but the hard copy bears no signature and hence whether a service of this notice in this manner is valid is also a debatable issue. 4.16 He submitted that the learned CIT-A has held in paragraph 6.1 of the order that the notice u/s 143(2) dated 13-8-2018 issued by the Income Tax officer Ward 7(2)(1) was a valid notice because on that day only said officer had “jurisdiction” over the PAN. As evidenced from the letter to the buyer from the Respondent as on 21-05-2018 enclosed in pages 21/05/2018 that the Department was aware that the assessee had filed his return in the status of non-resident and access to assessee’s account on the portal ( jurisdiction over PAN) was very much available to the Respondent also.

4.17 He submitted that so called access to the assessee’s account on the portal and inappropriate allocation of user rights over the assessee does not bestow “jurisdiction” to either the ITO Ward 7(2)(1) or Ward 1(2)(5) over the assessee. In the manual era if a return or a file went to the wrong officer, he would see that it would be forwarded to the officer having jurisdiction. He would not issue a notice if the jurisdiction was not vested with him just because the assessee’s records by mistake were in his office. In fact, in the manual era, the staff manning the receiving counters would ensure as much as possible that they received only returns over which their office had jurisdiction. 4.18 He submitted that even today, no application ( eg. for a tax clearance certificate) from an assessee is entertained and acted upon by the officer, who is shown on the portal to be the AO and having

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 19 of 30 access to the assessee’s account on the portal ( jurisdiction over the PAN), without said officer satisfying himself that he is vested with the jurisdiction as per Board’s instructions. The officers of the Department are well aware that access to PAN does not vest them with jurisdiction. Jurisdiction would be determined by the orders of the Board.

4.19 He submitted that in the case of Capstone Securities Analysis Private Limited vs DCITCircle1 (1). Pune, [2017] 85 taxmann.com 270 (Pune-Tri) the Pune Tribunal very clearly held that the PAN follows jurisdiction and not the other way round. In paragraph 10 of the order the Tribunal observed

“The stand of the Department is that jurisdiction of the Assessing Officer changes when PAN is transferred. We do not agree with this proposition of the ld. DR. The jurisdiction is transferred when the order is passed by the competent authority to transfer jurisdiction. Thereafter, steps are taken to transfer PAN and files. There would always be some time gap between the order of transfer of jurisdiction and consequent events viz. transfer of PAN and files. The Assessing Officer ceases to have jurisdiction over assessee immediately after order transferring jurisdiction is passed by the competent authority. order is passed by the competent authority to transfer jurisdiction. Thereafter, steps are taken to transfer PAN and files. There would always be some time gap between the order of transfer of jurisdiction and consequent events viz. transfer of PAN and files. The Assessing Officer ceases to have jurisdiction over assessee immediately after order transferring jurisdiction is passed by the competent authority.” The said order of the Pune Tribunal was upheld by the High court of Bombay, the decision reported in [2023] 145 taxmann.com 423 (Bombay)

4.20 As regards compliance with Section 124 (3)(a), the ld. A.R. submitted that: i. The assessee never responded to the notice u/s 143(2) sent by the Income Tax Authority who was not his Assessing officer. The said notice sent by email would accordingly be

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 20 of 30 deemed to never have been sent under Section 282 (1) (c) of the Income Tax Act, 1961 rws section 12 of the Information Technology Act,2000. ii. Had the said authority ensured that a fresh notice under Section 143(2) was duly served in terms of Section 282 then only would the assessee be obliged u/s 124 to point out to her that the notice was invalid. iii. The said Income Tax Authority suo moto realized that she was not the Assessing officer and the PAN was transferred to the Income Tax Officer Ward 1(2)(5). Hence there was no need to bring up the jurisdictional defect. iv. When notice u/s 142(1) was issued by the Income Tax Officer Ward 1(2)(5) , the assessee duly informed him that he was not the Assessing Officer and the proceedings under Section 143(2) also were not validly initiated. The assessee however furnished all the information called for by him. v. None of the notices sent by email by the Respondent were responded by the assessee having gone into his spam folder. Had the Respondent taken efforts to send the notices under Section 129 and 142(1) by alternate mode available under Section 282, the assessee observing that the proceedings are now initiated by his AO, would have complied with these notices after pointing out that the proceedings were not initiated by him and hence invalid.

Hence he submitted that on all the above counts, the order now passed should be cancelled. 4.21 As regards the invalidity of the notices sent and order passed without observing the principles of natural justice (Ground No 4), the ld. A.R. submitted as follows: a) The learned CIT(A) erred in concluding that chronology of events showed that assessee had adopted dilatory tactics when the same are not true and when the delay in conduct

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 21 of 30 of assessment proceedings was on account of the Department.

b) The learned CIT(A) erred in upholding order passed based on notices sent in email not responded by the assessee and notice served at the assessee's address when the person authorized to receive notices was not present in the house.

c) The learned CIT(A) erred in upholding the order stated to be based on show cause notice dated 20-12-2019, fixing the hearing on 24-12-2019, when no such notice was served on the assessee and such notice giving very short time to respond was against the principles of justice and fairplay. 4.22 He submitted that as per the order of the learned Respondent he had sent the following notices electronically:

Date Section Due Date Action by Follow Implications specified in Assessee up by under the notice Respond Section 12 ent of the Information Technology Act,2000 11-11-2019 142(1) 18-11-2019 No Issued Notice as rws 129 Response letter good as not dated 2- sent 12-2019 2-12-2019 letter 6-12-2019 No Show Notice as Response Cause good as not Notice sent dated 20- 12-2019 issued 20-12-2019 Show 24-12-2019* No Passed Notice as Cause Response the order good as not Notice on 26-12- sent 2019

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 22 of 30 4.23 He submitted that the show cause notice actually called for the submission of the response by 23-12-2019. A print of the soft copy of the notice was served at the assessee’s residence when his mother who was the GPA holder was not in town and the cover came to be opened only on 25-12-2019 much after the due date for compliance. However, the assessment order is silent on this aspect and the service by hand delivery does not appear to have been relied upon by the AO.

4.24 He submitted that an email is akin to a letter sent under “Certificate of Posting”. It has no evidentiary value as regards “service”. It is a basic principle of equity that a notice should be received by the recipient before the sender can act on the same. Sufficient safeguards have been put in place within the Information Technology Act,2000 to ensure that no action can be taken by the sender on an electronic communication unless the receipt of the same is acknowledged by the receiver. Attention is again drawn to paragraph 1 g) above discussing the validity of service in electronic mode and effect of no response to an electronic communication. A notice sent by electronic communication is deemed never to have been sent if there is no response from the recipient. It was incumbent upon the Respondent to follow up through alternate modes and ensure that the notices were duly served giving time for the assessee to respond.

4.25 He submitted that in the manual era, if there was no response to a letter sent through ordinary post, the A.O. would send a communication through Registered Post. If the cover was returned undelivered, he would follow up by service through a notice server or posting on the premises of the notices. Communication electronically does not exempt A.O. from ensuring that the assessee has received the notices.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 23 of 30 4.26 Hence he submitted that the present order is passed without the service of notices by the learned AO and needs to be struck down on this ground also.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 24 of 30 the Act unless there was a notification in exercise of power u/s 127(4) of the Act for transfer of jurisdiction on assessee from ITO Ward-4(1), Bangalore to ITO Ward-7(2)(1), Bangalore. As such, jurisdiction of AO i.e. ITO Ward-4(1) where did the assessee filed the return of income cannot be subject to assessment by ld. AO i.e. ITO Ward 7(2)(1), Bangalore without proper transfer of assessee’s jurisdiction to ITO Ward 7(2)(1), Bangalore. According to ld. A.R., the issue of notice by ITO Ward-7(2)(1) is invalid notice on the basis of which, the assessment u/s 143(3) of the Act in the case of assessee cannot be framed by ITO, Ward (International Taxation), Circle-1(1), Bangalore. Admittedly, in this case, assessee has filed a return of income u/s 139(4) of the Act before ITO Ward-4(1) Bangalore. However, the notice u/s 143(2) of the Act dated 13.8.2018 was issued by ITO Ward 7(2)(1), Bangalore. The issue of notice u/s 143(2) of the Act by the ITO Ward 7(2)(1) ought to have valid jurisdiction and in the present case, the department is not able to provide any order for transferring the jurisdiction from ITO Ward 4(1) Bangalore to ITO Ward 7(2)(1), Bangalore.

6.1 We find the facts of the present case are identical to the case already decided by the ITAT Kolkata Bench in the case of Rungta Irrigation Ltd. (supra). The issue in the case before the ITAT Kolkata Bench in the case of M/S.Rungta Irrigation Ltd. Vs. ACIT in ITA No.1224/Kol/2019 order dated 6.9.2019 was whether, non-issue of notice u/s.143(2) by the AO who passed the assessment order will render the order of assessment void or was it a curable defect. It was the plea of the Assessee that as held by the Hon’ble Supreme Court in Hotel Blue Moon 321 ITR 362 (SC), non-issue of notice u/s.143(2) by the AO who passed the order of assessment renders the order of assessment a nullity. The factual details in that case were as follows:

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 25 of 30

Sl. No. Date Events 1. Upto 08.10.2008 DCIT, Circle-15(1), New Delhi was the AO of assessee on the basis of territorial jurisdiction. 2. On 08.10.2008 CIT-V, Delhi transferred the jurisdiction over the assessee’s case u/s. 127 to DCIT,Central Circle- 1, Ranchi. 3. From 09.10.2008 to 03.11.2017 DCIT, Central Circle-1, Ranchi was the AO of assessee for all proceedings under the Act. 4. On 28.07.2016 ACIT, Circle-21(1), New Delhi issued notice u/s. 143(2) to the assessee. 5. On 30.06.2017 ACIT, Circle-21(1), New Delhi issued notice u/s. 142(1) to the assessee. 6. On 17.07.2017 Assessee objected to jurisdiction of ACIT, Circle-21(1), New Delhi. 7. On 07.08.2017 Show Cause Notice/proposal for centralization of assessee’s case at Kolkata issued by Pr. CIT7, Delhi. 8. On 16.08.2017 Assessee objected to the jurisdiction of Pr. CIT7, New Delhi. 9. On 24.10.2017 Pr. CIT, Central Patna issued Show Cause Notice for centralization of assessee’s case under the charge of Pr. CIT, Central 2, Kolkata. 10. On 03.11.2017 Pr. CIT, Central Patna passed order u/s. 127 centralizing the assessee’s case with ACIT, Central Circle-3(1), Kolkata under the charge of Pr. CIT, Central 2, Kolkata. 11. On 09.11.2017 ACIT, Central Circle-3(1), Kolkata intimates the assessee u/s. 129 being the succeeding AO for AY 2015-16. 12. On 05.12.2017 Notice u/s 142(1) issued by ACIT, Central Circle-3(1), Kolkata for AY 2015-16.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 26 of 30

6.2 According to the revenue as per section 127 of the Act, which deals with transfer of jurisdiction of a case specifically provides in sub-section (4) of section 127 that there is no necessity to re-issue of any statutory notices already issued by the AO from whom the case is transferred. The Tribunal held that after the order of the CIT- V, New Delhi dated 08.10.2008 transferring the jurisdiction of the assessee’s case to DCIT, Central Circle, Ranchi, the CIT, Delhi became functus officio and thereby his subordinate officers viz., ACIT, Circle 21(1), New Delhi, could not have issued notice u/s. 143(2) dated 28.07.2016 and in that view of the matter the notice issued by the ACIT, Circle-21(1), New Delhi u/s 143(2)was without jurisdiction and, therefore, non-est in the eyes of law. The Tribunal held that the ACIT, Central Circle-3(1), Kolkata who framed the assessment order dated 29.12.2017 pursuant to transfer of case ordered by PCIT, Central Patna dated 03.11.2017 u/s. 127 of the Act, without there being valid issuance of notice u/s 143(2) of the Act and therefore the said order is bad in law as held by the Hon’ble Supreme Court in CIT V Hotel Blue Moon (2010) 321 ITR 362 (S.C) wherein the Hon’ble Supreme Court has held that issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s. 143(3) of the Act and absence of a valid notice u/s 143(2) is not a curable defect. The Tribunal also noticed that it’s view in the case of Hotel Blue Moon (supra) was reiterated by the Hon’ble Apex Court in the case of CIT Vs Laxman Das Khandelwal (108 taxmann.com 183). The relevant observations of the Hon’ble Supreme Court were extracted and are as follows: “5. At the outset, it must be stated that out of two questions of law that arose for consideration in Hotel Blue Moon's case the first question was whether notice under Section 143(2) would be mandatory for the purpose of making the assessment under Section 143(3) of the Act. It was observed:-

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 27 of 30

"3. The Appellate Tribunal held while affirming the decision of CIT (A) that non-issue of notice under Section 143(2) is only a procedural irregularity and the same is curable. In the appeal filed by the assessee before the Gauhati High Court, the following two questions of law were raised for consideration and decision of the High Court, they were: "(1) Whether on the facts and in circumstances of the case the issuance of notice under Section 143(3) of the income Tax Act, 1961 within the prescribed time-limit for the purpose of making the assessment under Section 143(3) of the Income Tax Act, 1961 is mandatory? And (2) Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner of Income Tax (Appeals), the additions made under Section 68 of the Income Tax Act, 1961 should be deleted or set aside?" 4. The High Court, disagreeing with the Tribunal, held, that the provisions of Section 142 and sub-sections (2) and (3) of Section 143 will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under Section 158-BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the Revenue. The Revenue thereafter applied to this Court for special leave under Article 136, and the same was granted, and hence this appeal. …. 13. The only question that arises for our consideration in this batch of appeals is: whether service of notice on the assessee under Section 143(2) within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1961? ….. 27. The case of the Revenue is that the expression "so far as may be, apply" indicates that it is not expected to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143 strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression "so far as may be, apply". In our view, where the assessing officer in repudiation of the return filed under Section 158-BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143."

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 28 of 30 "292BB. Notice deemed to be valid in certain circumstances.—Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was – (a) Not served upon him; or (b) Not served upon him in time; or (c) Served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment."

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 29 of 30 to cure. The Section is not intended to cure complete absence of notice itself. 10. Since the facts on record are clear that no notice under Section 143(2) of the Act was ever issued by the Department, the findings rendered. by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.”

6.3 In the present case, as discussed in earlier paras, notice u/s 143(2) of the Act has been issued by ITO Ward 7(2)(1) Bangalore and there was no material to say that he is having valid jurisdiction over this assessee so as to issue notice u/s 143(2) of the Act when the assessee filed his return of income with ITO Ward 4(1) Bangalore. In our opinion, notice u/s 143(2) of the Act dated 13.8.2018 issued by ITO Ward 7(2)(1), who is having no jurisdiction over the assessee as on date as there was no transfer of assessee’s case to this ITO u/s 127 of the Act. The ld. AO who framed the assessment i.e. ITO Ward (International Taxation), Circle 1(1), Bangalore has been given no notice u/s 143(2) of the Act to frame assessment u/s 143(3) of the Act. Hence, the assessment order framed on 26.12.2019 is based on the notice issued u/s 143(2) of the Act dated 13.8.2018 by ITO Ward- 7(2)(1), Bangalore. Thus, the assessment order framed by ITO Ward (International Taxation), Circle-1(1), Bangalore is without issuing valid notice u/s 143(2) of the Act, which cannot stand on its own legs. Hence, the assessment order framed vide order dated 26.12.2019 by issuing a notice u/s 143(2) of the Act on 13.8.2018 by ITO Ward 7(2)(1), Bangalore is without jurisdiction. 6.4 We also find that the Hon’ble Karnataka High Court in the case of Nittu Vasanth Kumar Mahesh Vs. ACIT W.P.No.2387/2019(T-IT) in its judgment dated 11.4.2019 reported in (2019) Taxman 277 (Karnataka) has taken a view that nonservice of notice u/s.143(2) of the act renders the order of assessment bad in law and that the provisions of Sec.292BB of the Act cannot cure such a defect.

IT(IT)A No.632/Bang/2023 Suman Bhat, Bangalore Page 30 of 30 6.5 In view of the above, we annul the impugned assessment order dated 26.12.2019 for the assessment year 2017-18 framed by ITO (International Taxation), Ward 1(1), Bangalore. This ground of appeal of the assessee is allowed.

6.6 The other grounds of appeal and also additional grounds of appeal have become infructuous in view of the fact that we have quashed the impugned assessment order herein.

Order pronounced in the open court on 1st Dec, 2023

Sd/- Sd/- (Beena Pillai) (Chandra Poojari) Judicial Member Accountant Member

Bangalore, Dated 1st Dec, 2023. VG/SPS

Copy to:

Asst. Registrar, ITAT, Bangalore.