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Income Tax Appellate Tribunal, HYDERABAD BENCH ‘A, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, AM: This appeal filed by the assessee is directed against the order of CIT(A) – 1, Hyderabad, dated, 24/11/2017 for AY 2013-14.
Brief facts of the case are, assessee, an individual, filed his return of income for the AY 2013-14 on 23/03/2015 declaring an income of Rs. 1,74,000/-. Subsequently, the case was selected for scrutiny under CASS and accordingly, notice u/s 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was issued on 31/08/2015 and the same was served on 30/09/2015. Notice u/s 142(1) and final show cause letters were issued to the assessee, against which there was no compliance from the assessee. Since there was no compliance from the assessee, the AO completed the assessment u/s 144 of the Act by taking information from AP Mahesh Cooperative
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Bank. Accordingly, additions were made to the extent of Rs. 31,27,439/-.
Aggrieved with the above order of AO, assessee preferred an appeal before the CIT(A) and before the CIT(A) the assessee submitted that assessee has filed its return of income with ITO, Ward – 9(1), Hyderabad. However, the case was selected for scrutiny by ITO, Ward - 4(2), Hyderabad and submitted that the ITO, Ward – 4(2) does not have jurisdiction over the assessee. Further, he submitted that notice dated 31/08/2015 was issued u/s 143(2) by ITO, Ward – 4(2) posting the case on 28/09/2015 for hearing, but, it was only served on the assessee on 30/09/2015 i.e. after the date of expiry of date of hearing. Since notice was impossible to comply with, hence, not a valid notice, which was served on the assessee after the expiry of period of limitation u/s 143(2). It was, therefore, submitted that the assessment was barred by limitation and without jurisdiction.
3.1 The CIT(A) called for a remand from the AO on jurisdiction as well as on merit.
3.2 With regard to jurisdiction issue, the AO submitted a remand report on 27/09/2017, which is extracted as under:
“• Notices were served on the assessee by way of affixture, including the assessment order and demand notice. • The return was filed with the address 16-2-148/8/1, 1st Floor, Opp. Adarsh Vidya Mandir School, Dayanand Nagar, New Malakpet, Hyderabad. Prior to AY 2013-14, the assessee was being assessed with ACIT-4(1), Hyderabad.
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• The first notice u/s.143(2) was received by assessee's wife on 30.09.2015 vide acknowledgement available on record.”
3.3 The assessee replied to the remand report, which is extracted as under: “• The assessee submitted that notice u/s.143(2) dated 31.08.2015 was served on the assessee 30.09.2015 and not by service by affixture. Since the assessee was out of station his wife Mrs. Archana Patel went to Income Tax Office to receive notice on his behalf. • The assessee submitted that notice u/s.143(2) dated 31.08.2015 was served on assessee on 30.09.2015 but the date of hearing in the notice was 28.09.2015 and not 31.10.2015. Therefore the first notice u/s.143(2) dated 31.08.2015 was un compliable notice and hence invalid. • Regarding the enquiries made and Inspectors report, the assessee submitted that no such statement was given by the owner of the premises (assessee's brother). The assessee submitted Affidavit of his brother Shri Suresh Chandra Patel. • The assessee submitted he corresponded his address i.e., 14-9413, Chudi Bazaar, Hyderabad, vide letter dated 26.04.2016 to the Assessing Officer. • The assessee submitted that except notice u/s.143(2) dated 31.08.2015, no further notice was served on him. • The assessee submitted that the proceedings were made without jurisdiction, as assessee's address falls in jurisdiction of Range-9, Hyderabad, since he filed return of income in Range-9, Hyderabad.” 3.4 After considering the remand report and the reply of the assessee against the remand report, the CIT(A) dismissed the grounds raised by the assessee by observing as under:
“ a) The notices were issued to the address given as per Return of income filed. No other addresses were mentioned in the return or in the subsequent correspondences during the assessment proceedings. In regard to the address of the assessee, on which jurisdiction of assessment has been questioned, was 16-
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2-148/6/1, 1st Floor, Opp: Adarsh Vidya Mandir School, Dayanandnagar, Hyderabad. Assessee has given change of address or correspondence address only after the assessment order was passed i.e., vide letter dated 26.04.2016. While the assessment order was passed on 31.03.2016. Hence Assessing Officer is correct in sending notices to the given address of the assessee. b) In regard to the notice which the Assessee's wife has received, was a valid notice. The receiving of this notice by personal attendance, has been noted in the acknowledgment of the notice. Despite receiving the notice, as seen from records, no reply was given by the assessee between 30.09.2015 i.e., date of receipt of notice by the assessee wife's till the date of assessment order dated 31.03.2016. This shows the lackadaisical attitude of the assessee. Even after receiving notices, he did not bother to appear or cause to appear before the Assessing Officer. c) Assessee has submitted an affidavit of his Brother Shri Suresh Chandra Patel before me which was not given before the Assessing Officer. Shri Suresh Chandra Patel confirms that assessee was a resident in the 16-2- 14/6/1, Opp.Adarsh Vidya Mandir School, Dayanandnagar, New Malakpet, Hyderabad during the year, November, 2014 to February, 2016. This affidavit given in the capacity of his brother and owner of the premises. It is pertinent to note that no reference was made to the affixture of notices by Income Tax Department (affixture was supported by witnesses' signatures), nor disclaimed that notices were not received. The affidavit only talks of residence of his brother in the building, no information or evidence was given to show that his brother lived in that building or why the notices were not received by his brother. Hence, the affidavit has no value as its contents was not proved. d) The assessee was asked to produce electricity bill or any other bill which can show his proof of residence. Assessee did not have anything to produce to confirm his residence in the said premises. her evidence was produced before me, to show that the Assessing Officer's contention, that it was not a fake address. e) In regard to the issue whether the jurisdiction, assessee has contended the jurisdiction is with Range-9 and he filed return of income. Going by the fact, the
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address change was communicated, subsequently after the assessment order, over may have the jurisdiction with Range-9. The assessee has filed return of Income for both the AYs i.e., AY 2012-13 & AY 2013-14 to a designated ITO, Ward-9(1). Since the address mentioned, is Door No.1-10-122/A/2, Ashok Nagar, Hyderabad in the return filed, the jurisdiction vests with Range-4. The file was subsequently transferred to the ITO, Ward-4(2), Hyderabad, as per the jurisdiction. I do not find any mistake in passing of order by the ITO, Ward-4(2), Hyderabad as the jurisdiction of the mentioned address lies with Ward-4(2).”
3.5 Further, CIT(A) has called for a remand report on merit also. Accordingly, she came to the conclusion as under:
3.6 With regard to Bank deposits in SB A/c, the CIT(A) observed as under: “The submissions of the appellant have been carefully considered. The AO in the remand report has not pin pointed lacunae in the submissions of the appellant. The appellant has made the following transactions: Date Particulars Withdrawal Deposits (Rs.) (Rs.) 15.04.2012 Y/S 3,00,000 04.05.2012 Self 9,000 18.05.2012 Self 3,00,000 12.06.2012 Cash 1,00,000 12.06.2012 Cash 1,00,000 12.06.2012 Cash 1,00,000 26.08.2012 Cash 2,50,000 30.11.2012 Cash 2,00,000 30.11.2012 Cash 2,00,000 30.11.2012 Cash 2,00,000 30.11.2012 1,00,000 20/01/2013 Self 1,59,000 Total 7,68,000 12,50,000
The contention of the appellant that cash withdrawals from the bank was the source of deposits of cash in the bank, is not clear. As per the bank details given by the Appellant mentioned above, the withdrawals was Rs.6,09,000/- as on 18.05.2012. Hence even if the contention of the appellant is accepted, appellant had only Rs.6,09,000/- at his disposal. Hence deposit of
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balance [Rs.12,50,000/- (-) Rs. 609000/- ] of Rs.6,41,000/- is not explained. Giving benefit of the explanation submitted before me, the appellant has not given any explanation regarding the source of Rs.6,41,000/- of cash deposits in his account. Hence, addition of Rs.6,41,000/- is upheld. Appellant gets relief to the extent of Rs.6,09,000/-.” 3.7 With regard to fixed deposits, the CIT(A) observed as under: “8.2 Before me, the appellant submitted that it is not known how the AO arrived at the figure of Rs. 15,06,900/-. The appellant submitted that the total deposit made during the year was Rs. 21,50,000/- and source for each deposit is as follows: S.No. Date of Amount of Source deposit deposit (Rs.) 1 15.04.2012 3,00,000 Out of opening balance as on 01.04.2012. 2 12.06.2012 50,000 Out of cash deposited on 12.06.2012 3 12.06.2012 2,50,000 Out of cash deposited on 12.06.2012 4 27.08.2012 2,50,000 Out of cash deposited on 26.08.2012 5 30.11.2012 7,00,000 Out of cash deposited on 30.11.2012 6 04.02.2013 6,00,000 Out of balance compensation received from GHMC Total 21,50,000 The appellant submitted that the AO has already added the cash deposit made on 12/06/2012, 26/08/2012 and 30/11/2012. The appellant submitted that the addition was made without any basis and may kindly be deleted. 8.5 he submissions of the appellant have been carefully considered. Out of total deposit of Rs.21,50,000/-, only Rs.7,00,000/- has been shown source as Compensation received from GHMC and Rs.3,00,000j- from opening balance. In regard to balance amount, no source have been submitted by the appellant before me. Hence, the balance of Rs.11,50,000/- deposited by cash during the FY 2012- 13, is not accounted by the appellant. Also, it is pertinent that appellant has not shown any business income during the relevant year. These cash deposits
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are over a period of time. Hence, in absence of proof, Rs.11,50,000/- is to be treated as unexplained income. Appellant gets relief to the extent of RS.10,00,000/-.”
3.8 With regard to compensation from GHMC, the CIT(A) observed as under: “9. The submissions of the appellant have been carefully considered. The contention of the appellant that since the capital receipts from GHMC were spilled over two years, hence the compensation received in second year is not taxable, is not accepted. The compensation order dated 30.12.2011 of the GHMC includes both the amounts. Hence, the addition made by the Assessing Officer is upheld.”
Aggrieved with the order of CIT(A), the assessee preferred an appeal before us raising the following grounds of appeal: “1) The learned CIT(Appeals) erred in holding that Order passed u/s. 144 dated 31.03.2016 by Income Tax Officer, Ward 4(2), Hyderabad is a valid Order. 2) That the learned CIT(Appeals) erred in upholding the assumption of jurisdiction by Income Tax Officer, Ward 4(2), Hyderabad despite the fact that Appellant's address mentioned in Return of Income was 16-2- 148/B/1, 1st floor, Opp: Adarsh vidya Mandir School, Dayanand Nagar, New Malakpet, Hyderabad and this address falls in jurisdiction of Income Tax Officer, Ward 9(1), Hyderabad and Appellant had been filing Return of Income in Ward 9(1), Hyderabad. 3) That without prejudice to above, the learned CIT(Appeals) erred in upholding the validity of the Notice dated 31.08.2015 issued u/s.143(2) of Income Tax Act, 1961 regardless of the fact that the aforesaid notice posting the case for hearing on 28.09.2015 was served on 30.09.2015 i.e. after the date of posting and since the terms of the notice were impossible to comply with, the notice so served was a invalid notice & hence the consequent assessment proceedings were also illegal. 4) That without prejudice to above, the assessment made u/s 144 is also bad in law as the Notice u/s 142(1)
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and show cause notice was not served and the alleged service by affixture is illegal as none of the circumstances specified under Rule 17 of Order V of Code of Civil procedure Code, 1908, which warrant service by affixture were existing to justify the action of service by affixture. 5) That without prejudice to above, the learned CIT(Appeals) erred in confirming the addition of Capital Gains on part of compensation received by Appellant on acquisition of his shop by Municipal authorities ignoring the fact that Appellant had offered the capital gain on entire compensation in assessment year 2012-13 in terms of Section 45(5) of Income Tax Act, 1961. 6) That the learned CIT(Appeals) erred in sustaining an addition of Rs.11,50,000/- towards fixed deposit made in Bank from unexplained sources ignoring Appellant contention that Fixed Deposit was made out of cash deposited in Bank Account and the cash deposited was already added as income from unexplained source. 7) That the learned CIT(Appeals) erred in sustaining addition of Rs.6,41,000/- towards cash deposit in Bank Account from unexplained savings ignoring the Appellant submission that the source for deposit was accumulated savings of appellant. 8) That the reasons assigned by ld. CIT(A) are wrong, insufficient and illegal.”
Ground Nos. 1, 8 & 9 are general in nature and ground Nos. 2 to 4 are jurisdictional issue and ground Nos. 5 to 7 are on merits.
Before us, ld. AR submitted that the facts about jurisdiction and reiterated similar submissions as made before the ld. CIT(A).
On the other hand, ld. DR submitted that PAN denotes the jurisdiction of AO, Ward – 4(2), therefore, jurisdiction lies with AO – 4(2) and the address given to bank remains the
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same as per the PAN details. He supported the orders of revenue authorities.
In the rejoinder, the ld. AR of the assessee brought to our notice the enquiry report in the case of Virendrakumar Patel, as per which, the notice u/s 142(1) and its summons were served by affixture on 10/12/2015 by the Inspector, Ward – 4(2) and the summons were also issued in the name of Ramesh Kumar Patel, who is the owner of the premises and the owner has informed that there was no such person stayed in the premises earlier or at present. He brought to our notice an affidavit filed by Mr. Suresh Chandra Patel, who is the owner of the address 16-2-148/B/1 situated at Daya Nagar, New Malakpet, Hyderabad. As per the affidavit, assessee is the brother of owner of the property and he has not given any statement to any officer. Ld. AR submitted that there is a contradiction between enquiry report of the AO and the reality. Further, he relied on the following cases: 1. CIT Vs. Kurban Hussain Ibhrahimji Mithiborwala, 182 ITR 821 (SC), holding that if the notice issued by the AO is invalid for any reason, the entire proceedings taken by him would become void for want of jurisdiction. 2. CIT Vs. Ramendra Nath Ghosh, 82 ITR 888 (SC), in the matter of service of notice by affixture. 3. CIT Vs. Hotline International P. Ltd., 296 ITR 333 (Del.) in the matter of service of notice by Affixture. 4. CIT Vs. AVI-Oil India P. Ltd., 323 ITR 242 (P&H) 5. CIT Vs. Dr. KC Verma, 26 ITR (Del.) holding that best judgment assessment is not valid without service of notice u/s 142(1) of the Act.
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Considered the rival submissions and perused the material on record. With regard to Ground Nos. 2 to 4 on jurisdiction issue, we shall discuss the issue on jurisdiction of AO, validity of notice u/s 143(2) of the Act. As far as the issue of jurisdiction of AO, normally the jurisdiction of AO depends upon the “PAN” and it is determined based on business type and address of the assessee. Even if assessee files his return of income quoting any other range as its jurisdiction, still, it will be assigned to the AO, in whose range the “PAN” was allotted. In case, assessee changes the address, it is the duty of the assessee to intimate the same to the AO as per section 139A(5)(d) of the Act. When the same is intimated, the jurisdiction of the PAN changes. Mere intimating in return of income of such change does not alter the jurisdiction over the assessee. In the given case, assessee has only filed return of income and declared the change of jurisdiction of AO. Assessee has no power to decide, who will be the AO in his case, it is available only based on the PAN allotment. In case, assessee wanted to change the AO, there is separate procedure. Coming to the present case, the jurisdiction of present AO, is based on the “PAN” allotment, which is valid i.e. Range – 4(2). It is also noticed that the change of address was intimated by assessee only after completion of assessment.
9.1 Coming to the issue of validity of notice u/s 143(2), the notice dated 31/08/2015 was served only on 30/09/2015 in the hands of assessee’s wife. The delay in serving the notice before 30/09/2015 was due to confusion about the valid address of the assessee. As per section 143(2) of the Act, it has to be served within 6 months from the end of the financial year in which the return is furnished. In this case, the notice
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was served before expiry of 6 months. Therefore, it is a valid notice.
9.2 Coming to notice u/s 142(1), the same was not served to the assessee due to the fact that the assessee was not available in the address to take the notice. Assessee was served with the 143(2) notice and he is aware that there is assessment pending and he chose not to communicate or inform the correct address to the AO. We cannot blame only the AO for not serving the notice, even the assessee chose not to cooperate with the AO in completing the assessment proceedings. It was brought to our notice that in the disputed address, only his brother is staying and there cannot be any communication between the brothers about the affixture of the notice in the disputed address. This is totally abuse of the procedure by both parties. Therefore, assessee cannot find fault only with AO for non-serving of the notice. Accordingly, grounds raised by the assessee are dismissed.
9.3 With regard to ground No. 5, we considered the submissions and information available on record. We noticed that assessee has offered to tax the compensation received from GHMC in AY 2012-13 to the extent of Rs. 6,42,693/- and in AY 2013-14 – Rs. 6,71,439. The relevant Form 16A, return of income for AY 2012-13 are filed by assessee in the form of paper book. It clearly shows that assessee has offered to tax the capital gains for the total value of compensation in AY 2012-13 itself, but, the settlement was made by GHMC in two instalments. Therefore, the addition made by AO in this regard is deleted.
9.4 With regard to ground No. 6, we have noticed that assessee made cash deposits in his saving bank and
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subsequently, he opened the fixed deposit. There is no way that assessee can open Fixed Deposit directly by depositing cash in Bank. It can only be through the SB account maintained by him in the bank. We noticed from the CIT(A)’s order that the date of credits of FD and date of cash deposits are matching in the bank statement as mentioned in para 3.6 and 3.7 (supra). Therefore, the addition made on FD is deleted.
9.5 With regard to ground No. 7, assessee could not explain the additional cash deposit to the extent of Rs. 6,41,000/- either before the CIT(A) or before us. Therefore, we are inclined to sustain the addition.
In the result, appeal of the assessee is partly allowed.
Pronounced in the open court on 12th June, 2019.
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 12th June, 2019. kv