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Income Tax Appellate Tribunal, DELHI “SMC-1” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
ORDER PER KUL BHARAT, JM :
This appeal filed by the assessee for the assessment year 2011-12 is directed against the order of Ld. CIT(A)-33, Delhi dated 07.07.2020. The assessee has raised following grounds of appeal:-
1. " That the Notice u/s 148 of I. T. Act 1961 was not served on the appellant in time in accordance with law, the reassessment made consequent thereto was without jurisdiction and liable to be quashed.
2. That the A.O. Delhi usurped the jurisdiction by passing the order without recording reasons resulting in the impugned order being null in the eyes of law. 3. That when the ground for reopening the assessment do not exist any longer after giving relief by the CIT (Appeal), the addition u/s 50C of I.T.Act 1961, which was not part of the reasons to believe, no addition could be made by the CIT(Appeal).
4. That the variation between circle rate and the actual sale consideration of the property was only Rs. 5,50,000/-, which is 9.09% of the circle rate, is required to be ignored for applicability of Section 50C of I. T. Act 1961.
That the CIT (Appeal) making an addition of Rs. 5,50,000/- u/s 50C of I. T. Act 1961without making reference to the Valuation Officer on the request of the appellant u/s 50C(2)(a) of I. T. Act 1961 is unjust, illegal, arbitrary and against the facts and circumstances of the case.
6. That the Action of the CIT (Appeal) in making an addition of Rs.5,50,000/- u/s 50C of I. T. Act 1961 is unjust, illegal, arbitrary and against the facts and circumstances of the case.
7. That objection for reopening the assessment raised were not disposed off by the A. O. before making the assessment, makes assessment Null and Void.”
Facts giving rise to the present appeal are that as per AIR information, it was noticed by the Assessing Officer that the assessee had sold immovable property for Rs.55,00,000/- during the year under consideration. Therefore, the case of the assessee was re-opened for assessment. A notice u/s 148 of the Income Tax Act, 1961 (“the Act”) was issued to the assessee on 28.03.2018. In response to the notice, the assessee filed objections which were disposed off vide letter dated 29.05.2018 by ITO, Ward-2(4), Noida. Thereafter, the case was transferred to the Assessing Officer, Ward-63(3), New Delhi. The assessee filed objections which was disposed off by a speaking order dated 01.11.2018.
Thereafter, the Assessing Officer proceeded to frame the assessment. It is recorded by the Assessing Officer that a notice u/s 142(1) of the Act was issued to the assessee on 21.12.2018. The Assessing Officer in para 4 of the assessment order rejected the explanation offered by the assessee by observing as under:-
4. “During the assessment proceedings, on perusal of the written submission filed on behalf the assessee by M/s Ashok Khandelwal & Associates on 12.12.2018, it is seen that the assessee has show long term capital gain on property bearing no.229, C 105, Noida and the capital gain of Rs.36,72,039/- earned after deduction indexed cost of acquisition is claimed exempt u/s 54 of the 1. T. Act, 1961 by investing the amount in purchase of house property. However, no evidence in support of investment in House property to qualify for deduction u/s 54 of the Act is submitted. In the absence of evidence in support of deduction claimed u/s 54 of the Act, show cause notice dated- 20.12.2018 is issued to the assessee to show cause as to why the deduction claimed u/s 54 of the Act shall not be disallowed. Instead of filing certain details, as an habit of non-compliance, the CA/AR of the assessee M/s Ashok Khandelwal & Associates on 21.12.2018 s requested for obtaining various documents, such as copy of sale deed of property available on record which is sold by the assessee and other documents related to reopening of the case, which are duly provided to them. However, on 21.12.2018 Ashok Kumar Khandelwal & Associates through e-mail has again raised certain issues regarding reopening of case. Since, the assessee is habitual of raising objections just to delay and mislead the assessment proceedings; the issues raised this time are not discussed. The same were disposed off several times during the assessment proceedings. However, in response to show cause notice dated-20.12.2018, the assessee has merely stated that practically no time is given for compliance. Evidently, the conduct
of the assessee shows that the assessee has nothing to submit in this regard. The assessee is required to just furnish evidence in support of the deduction claimed u/s 54 of the Act, which is to be available with the assessee as the return of income is filed on the basis of claiming deduction through the same. However, the assessee has not filed the same, it clearly shows that the assessee has nothing to submit in this regard and deduction claimed u/s 54 of the Act is nothing but afterthought of the assessee made after reopening of the case.
In view of the discussion made in the foregoing paragraph, the deduction of RS.36,72,039/- claimed u/s 54 of the Act of the disallowed and added to the income of the assessee under the head of capital gain. Since, the assessee has furnished inaccurate particulars of income, penalty proceedings u/s 271(1)(c) are being initiated separately.”
Hence, the Assessing Officer made addition of Rs.36,72,039/- and assessed income of Rs.43,30,829/- against the total income of Rs.6,58,790/-.
Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, allowed the appeal of the assessee, subject to enhancement made in terms of para 9 to 9.4.3 of the impugned order.
Aggrieved against this, the assessee preferred appeal before this Tribunal.
5. At the outset, Ld. Counsel for the assessee vehemently argued that the action of the authorities below is ex-facie illegal, arbitrary and unjustified is against the settled principle of law. He submitted that undisputedly the Assessing Officer, Noida had no jurisdiction to issue notice u/s 148 of the Act for re-opening of the assessment. He further contended that the assessee had been assessed to tax at Delhi. Hence, Assessing Officer at Delhi has the requisite jurisdiction. He further contended that re-opening of the assessment by issuing illegal notice by the Assessing Officer at Noida, vitiated the proceedings therefore, the assessment passed subsequently by the Assessing Officer at Delhi is nonest in the eyes of law. He submitted that a specific ground was taken before Ld.CIT(A) regarding legality of the re-opening of the assessment. He contended that grounds raised against the legality of notice issued u/s 148 of the Act has not been decided by Ld.CIT(A) by way of speaking order. He submitted that the proceedings is vitiated on account of the fact that firstly, the first notice which was issued by the Assessing Officer, Noida i.e. ITO, Ward-2(4), Noida dated 28.03.2018 was ab-initio without jurisdiction and as such the assessment framed in pursuance to the notice issued by an authority which has no jurisdiction is illegal and such action deserves to be quashed. He submitted that there is no dispute with regard to the fact that the Assessing Officer at Noida issued first notice u/s 148 of the Act and thereafter, the Assessing Officer at Delhi issued another notice u/s 148 of the Act. He submitted that the notice issued by the Assessing Officer u/s 148 of the Act by Assessing Officer at Delhi, firstly it was barred by time and secondly, the notice was issued without recording the reasons. He further submitted that under these facts, the assessment should have been quashed by Ld.CIT(A) however, he chose not to decide the specific issues raised before him.
Per contra, Ld. Sr. DR supported the orders of the authorities below and submitted that the assessment was framed by the Assessing Officer who was having jurisdiction. He further submitted that the objections against the reasons supplied by the Assessing Officer at Delhi were disposed off. The assessee participated in the re-assessment proceedings, moreover, the assessment was re-opened on the basis of tenable reasons.
I have heard the rival contentions and perused the material available on record. I find that the assessee had taken a specific ground regarding legality of the notice issued u/s 148 of the Act. Before Ld.CIT(A), the assessee has contended as under:-
“No service of notice u/s 148 of I. T. Act 1961 within the period of limitation It submitted that no notice within the period of limitation as required under Section 149(1)(b) of the IT Act, within a period of six years from 31-3-2011 was issued for reopening the assessment, as the notice u/s 148 dated 28.03.2018, issued by the Income Tax Officer, Ward 2(4), A- 2D, Aayakar Bhawan, Sector - 24, Noida, Uttar Pradesh was never received/served on the assessee. The notice was issued at wrong address at A-I0l, D-I0, Sector - 44, Noida, Gautam Budh Nagar, U.P., which was never the address of the appellant. The A.O. in his letter/order dated 01.11.2018 has clearly admitted that the notice u/s 148 of I. T. Act 1961 was issued at the wrong address at A-I0l, 0-10, Sector - 44, Noida, Gautam Budh Nagar. The correct address of the assessee was available with the A. O. Noida, in the copy of sale deed called for by him from the registrar as per letter dated 01.02.2018. It is submitted that the issue of the notice u/s 148 to the assessee and service of such notice upon the assessee are jurisdictional requirement that must be mandatorily complied with. These are not procedural requirements. For the AO to exercise jurisdiction to reopen an assessment, notice under Section 148(1) has to be mandatorily issued to the Assessee at the correct address. Further the AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282 (1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC, the legal requirement of service of notice upon the Assessee in terms of Section 148 read with Section 282 (1) and Section 153 (2) of the Act is a jurisdictional pre- condition to finalizing the reassessment. The onus is on the A.O. to show that proper service of notice has been effected under Section 148 of the Act on the Assessee at the correct address available on record in the copy of sale deed and further notices dated 22.05.2018 and 29.05.2018 having been issued at the correct address of the assessee, which were received and duly replied to. In the present case the A.O. has miserably failed to discharge that onus. The Reassessment proceedings could not be completed by the A.O. without effecting proper service of notice on the Assessee under Section 148 (1) of the Act. The assessment order passed on 24.12.2018 in these circumstances is invalid and is liable to be quashed/cancelled. It is further submitted that the assessee in the present case, having raised an objection regarding the failure by the A. O. to effect service of notice upon her, the main part of Section 292 BB is not attracted. It is submitted that on the facts of the present case it can be seen that since no proper service of notice had been effected under Section 148 (1) of the Act on the Assessee, the reassessment proceedings are liable to be cancelled. In this connection reliance is placed on the decision of Delhi High Court in the case of CIT vs. Chetna Gupta in of 2014 dated 15.09.2015 wherein it was held
"47. On the facts of the present case, the Court finds that the ITAT was right in its conclusion that since no proper service of notice had been effected under Section 148 (l) of the Act on the Assessee, the reassessment proceedings were liable to be quashed. Consequently, the question framed is answered in the affirmative, i.e., in favour of the Assessee and against the Revenue." Further reference may be made to the decision of Allahbad High Court in the case of Suresh Kumar Sheetlani Vs ITO-1(3) of 2011 dated 14/08/2018 wherein it was held that presumption of Service of Notice not applies if Dept had correct address. The court has held as under: - "20. Considering the aforesaid aspect of the matter, when the Department had correct address of the assessee, sending notice at incorrect address and then presumption drawn of service of notice is wholly erroneous. We find that the presumption drawn by the Tribunal on the ground that since notice was not received back unserved, it would be deemed to be service of notice, cannot be sustained.” Jurisdiction by the A.O., Noida In this case the A. O. Ward 2(4), Noida, U. P. issued notice u/s 148 at wrong address at A-101, D-10, Sector - 44, Noida, Gautam Budh Nagar, U. P. He however, subsequently issued notice u/s 142(1) of I. T. Act 1961 dated 22.05.2018 for filing the return of income at the correct address as available with him 28/1, Punjabi Bagh Extension, New Delhi. Nothing prevented A.O., Noida either to transfer the information to A.O., New Delhi, the jurisdiction at which the assessee was residing or issue notice at the correct address at 28/1, Punjabi Bagh Extension, New Delhi. In response to this notice reply letter dated 26.05.2018 was filed on 29.05.2018 mentioning as under: -
“Kindly refer to your notice under Section 142(1) of I T. Act 1961 dated 22.05.2018 asking the assessee for certain detailed information pertaining to A. Y. 2011-12. In reply it is submitted that no notice u/ s 148 has ever been served on the assessee for A. Y. 2011-12. Further notice for re-assessment should have been served on or before 31.03.2018 which was not done. Hence the present proceedings being time barred cannot legally be continued and may be dropped. It is submitted that the assessee is assessed to tax under PAN AAHPK9178N with Income Tax Officer Ward - 63(3), New Delhi. The Income Tax Officer Ward 63(3), New Delhi holds jurisdiction over my case. Details of jurisdiction as per Income Tax Department database is enclosed. Further two notices were issued u/» 142(1) of L T. Act 1961 at this address. The second notice is issued in the name of Smt. Pushpa Sharma. It is submitted that the aforesaid notice has wrongly been served on this address. No such person resides at this address. Notice is being returned in original". A.O. Noida further issued a notice dated 29.05.2018 wherein he mentioned about the sale deed and issue of notice. This was replied to by the assessee as per letter dated 02.07.2018 as under: - "Kindly refer to your notice dated 29.05.2018, in connection with re-assessment proceedings undertaken by you in pursuance to notice u/ s 148. In reply it is submitted as under: - The assessee objects the assumption of jurisdiction by you. It is already intimated that the assessee is assessed to tax under PAN AAHPK9178N with Income Tax Officer Ward - 63(3), New Delhi. The Income Tax Officer Ward 63(3), New Delhi holds jurisdiction over the case. Details of jurisdiction as per Income Tax Department database has already been placed on record according to which you do not hold any jurisdiction. It is not understood as to how you can continue to exercise jurisdiction in this case. If any order u/s 127 of the I. T. Act 1961 has been issued by the appropriate authority, transferring jurisdiction over this case to you may be given so that the assessee could submit to your jurisdiction. It is submitted that in the absence of any order u/s 127 transferring the case to you, re-assessment notice issued by you and subsequently proceedings based on said notice are without jurisdiction. If any reference is needed this could be had from the following judgments: - i. Smiriti Kedia vs. UOI (2012) 71 DTR 245, 250 CTR 221 (Cal), copy of the judgement is enclosed. ii. ITO vs. Rajinder Prasad Gupta (2010) 48 DTR-48a J.D. ITAT Illegal assumption of jurisdiction may not be further continued, proceedings may be filed so as to avoid unnecessary botheration/ harassment to assessee in the matter. Further notice u/ s 148 of I. T. Act 1961 was not issued within the time limit. In the notice dated 29.05.2018, you have further mentioned that the notice has been sent through speed post at the address available on record. Kindly share the relevant postal receipt for sending the notice through speed post and the address at which the same was sent. At the address of the assessee available with you no notice u/ s 148 has ever been served on the assessee for A. Y. 2011-12. It may be mentioned that the address of the assessee was duly available in the income tax records as all the subsequent notices were delivered at the address mentioned above. Notice for re-assessment should have been served on or before 31.03.2018 which was not done. Hence the proceedings are not only time barred but also without jurisdiction and therefore cannot legally be continued. Kindly provide your E-Mail ID for future communication. "
Thereafter the assessee's case was transferred to ITO, New Delhi who as per order dated 01.11.2018 after acknowledging the above two letters dated 26.05.2018 and 02.07.2018 addressed to the ITO, Noida confirmed in Para ii) that the notice u/s 148 was sent at the wrong address A-lOI, D-I0, Sector - 44, Noida, Gautam Budh Nagar, U. P. The A.O. Noida had the current address of the assessee at Delhi, could not have issued notice u/s 148 at wrong Noida address. He should have transferred the file in February/March to the ITO, New Delhi for taking action required under law including issue of notice u/s 148. Notice dated 06.12.2018 issued by ITO, New Delhi for 12.12.2018 The necessary reply was filed by the assessee as per letter dated 12.12.2018 on 12.12.2018. The assessee filed the return of income on 11.12.2018 under protest giving the details of capital gain on sale of property for Rs. 55,00,000/- and investment of capital gain in the acquisition of another residential property u/s 54 of I. T. Act 1961 and therefore the capital gain was NIL. Further show-cause notice dated 20.12.2018 for 22.12.2018 was issued, which was replied to by the assessee as per letter dated 21.12.2018. When this reply was filed, the assessee was given notice u/s 143(2) dated 21.12.2018 for making compliance for 22.12.2018. After filing the return it was incumbent upon the A. O. to issue notice u/s 143(2) and proper time and sufficient opportunity should have been allowed. To give time for a day is not a sufficient time to make compliance. On 22.12.2018 the assessee filed the reply as per letter dated 21.12.2018 and asked for some time for filing copy of purchase deed for the property for claiming exemption u/s 54 of I. T. Act 1961 and in the last para of the letter made the following submissions: - "As submitted earlier the assessee has misplaced the copy of deed for purchase of the property in March' 2011 for showing investment in the property for availing benefit u/ s 54 of I T. Act 1961. The assessee is applying for obtaining certified copy and the same shall be filed. Few days time may be given as due to holidays for Saturday, Sunday and Tuesday is Christmas, the government offices would remain close. The case may be adjourned as for the notice u/ s 143(2) fixing the case on Saturday being holiday and giving no time for compliance". No further time was allowed by the A. O. and the assessment order was passed on 24.12.2018 after disallowing the exemption claimed u/s 54 of the I. T. Act 1961 at Rs. 36,72,039/-. On 26.12.2018 the assessee filed the copy of deed for purchase of property for Rs. 37,44,000/- for exemption u/s 54 of I. T. Act 1961. As this deed which is important for deciding the appeal may be admitted for hearing under Rule 46A of I. T. Rules, as the same could not be filed before the A. O. due to the peculiar circumstances of the case as mentioned above. Exemption under Section 54 for purchase of property as claimed may be allowed. Assessment was taken at the fag end of time bar and rushed through without giving proper time and opportunity for filing the necessary evidence for investment in new house property.”
However, Ld.CIT(A) without adverting to the specific averment made before him has decided the issue in a casual manner by observing as under:-
6. “Ground No.1 is related to issues u/s 148 of the Act. From the information/documents evidence available on record, it is noticed that the notice was issued by the Assessing Officer, Noida. On objection raised by the appellant on the issue of assumption of jurisdiction by A.O. Noida, the case was transferred to the A.O. at Delhi i.e. the jurisdictional A.O. To that extent the hardship by the appellant is mitigated. Hence the Ground of appeal no.1 is dismissed.”
9. In my considered view, this approach of Ld.CIT(A) is not proper and is against the settled principle of law. Ld.CIT(A) ought to have passed a speaking order considering the all submissions and averment made before him by the assessee or his counsel. Therefore, I set aside the impugned order and restore this issue to the file of Ld.CIT(A) to decide the issue after obtaining Remand Report from the Assessing Officer as to when notice u/s 148 of the Act was issued to the assessee by the Assessing Officer at Delhi i.e. ITO, Ward-63(3), New Delhi. Further, the Ld.CIT(A) would give a clear finding about the reasons recorded by the Assessing Officer at Delhi.
Ld.CIT(A) would decide the issue raised before him regarding non-receiving of reasons by the Assessing Officer at Delhi and also issue of limitation qua issuance of notice u/s 148 of the Act by the Assessing Officer at Delhi.
Since, the impugned order is set aside therefore, all other grounds of assessee’s appeal are set aside to the file of Ld.CIT(A) for decision afresh.
In the result, the appeal of the assessee is allowed for statistical purposes only.
Above decision was pronounced on conclusion of Virtual Hearing in the presence of both the parties on 30th July, 2021.