SHRI GAURAV JOSHI,JALANDHAR vs. INCOME TAX OFICER WARD-1(5), JALANDHAR

Following grounds have been raised in this appeal: “1. That the order passed by the worthy CIT(A)-I, Jalandhar is against the law and facts of the case. 2. That having regard to the facts and circumstances of the case, the worthy CIT(A), Jalandhar is erred in law and on facts by confirming the action of Ld. AO in exceeding his jurisdiction and framing the impugned assessment order u/s 143(3) r.w.s. 147/148 and without complying with the mandatory conditions u/s 147/143(2)/151/127 as envisaged under the Income Tax Act, 1961.

The main grievance of the assessee vide ground no. 2 relates to the jurisdiction of the AO in reopening the assessment u/s 147 r.w.s 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act).

Facts of the case in brief are that the assessee e-filed the return of income on 08.08.2017 declaring an income of Rs.49,320/-. The said return was filed in response to the notice u/s 148 of the Act issued by the AO on 30.03.2017 on the basis of information with the department and by recoding the reasons as under: “As per information available on record the assessee has deposited a cash of Rs.1,39,28,640/- during the F.Y. 2009-10 relevant to the assessment year 2010-11. The assessee has not filed his return of income for the year under consideration. Letter was issued to the assessee to explain the sources of cash deposited, but there is no compliance. It means the assessee has no explanation to offer regarding the deposit of cash and same was deposited out of undisclosed sources of income. Therefore, in my view, Rs.1,39,28,640/- has escaped assessment within the meaning of section 147/148 of the Income Tax Act for the period relevant to the assessment year 2010-11. Under the circumstances, I have reasons to

Being aggrieved the assessee carried the matter to the ld. CIT(A) and raised the objection to the jurisdiction of the AO but the ld. CIT(A) did not find merit in that submission of the assessee by observing that this objection was not raised by the assessee before the AO. On the merit of the case also, the ld. CIT(A) sustained the addition by observing that the AO had duly examined and considered the explanation filed by the assessee regarding deposits in his bank account.

Now the assessee is in appeal. The ld. Counsel for the assessee submitted that in this case the proceedings u/s 147 of the Act were initiated by the ITO- 1(5), Ludhiana while the assessment has been framed by the ITO-1(5), Jalandhar who had not issued any notice u/s 148 r.w.s. 147 of the Act. Therefore, the assessment framed without issuing the notice u/s 148 r.w.s. 147 of the Act was bad in law. Reliance was placed on the decision of the ITAT Agra Bench in the case of Jawahar Lal Agarwal Vs ITO in ITA No. 336/Agra/2014 reported at (2017) 51 CCH 0421 (copy of the said order was furnished which is placed on record). It was further submitted that in the reasons recorded, the AO mentioned the figure of Rs.1,39,28,640/- but in the assessment order no such figure was there and the AO himself admitted that the bank deposits were only of Rs.51,24,064/-. Therefore, the reasons recorded

In his rival submissions, the ld. DR strongly supported the orders of the authorities below.

We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is an admitted fact that the ITO-1(5), Ludhiana issued the notice u/s 148 r.w.s. 147 of the Act, thereafter, the jurisdiction was transferred to the ITO-1(5), Jalandhar who never issued the notice u/s 148 of the Act but framed the assessment u/s 143(3) of the Act. On a similar issue, the ITAT Agara Bench in the case of Jawahar Lal Agarwal Vs ITO (supra) held as under: “Now, as per section 147 of the Act, the AO may assess or reassess any income escaping assessment, if he has reasons to believe such escapement of income. The section starts with the words 'If the Assessing Officer has reason to believe’. The word 'Assessee' in this phrase was substituted for the words 'Income Tax Officer’ by the Direct Tax Laws (amendment) Act 1987, w.e.f. 1.04.1988. The same enactment also introduced section 2(7A) in the Act. As per this section, 'Assessing Officer’-means an Officer, as named therein, who is vested with the relevant jurisdiction. Thus, it was only the Officer having jurisdiction over the matter who, u/s. 147, could have formed any reason to believe escapement of income and none other. It has not been shown otherwise. To reiterate, in the present case, the ACIT-1 Agra, who recorded the reasons to believe escapement of income and issued the notice u/s 148 of the Act admittedly did not exercise jurisdiction over the matter. In fact, evidently, this was the reason why the matter was transferred from the ACIT-1, Agra to the ITO 4(2) Agra. Therefore, the formation of the reasons to believe escapement of income is in direct violation of the provisions of section 147 of the Act.

It is also relevant to point out that the AO while issuing the notice u/s 148 of the Act has mentioned that the assessee had deposited a cash of Rs.1,39,28,640/- during the financial year 2009-10 in the bank account which had escaped assessment. On the contrary, in the assessment order, he mentioned that the cash deposited in the bank account of the assessee was Rs.51,24,064/-, which is evident from para 8.3 off the assessment order dated 14.12.2017. Therefore, the reasons recorded by the AO were not emerging from the record available with him.

On a similar issue, the Hon’ble Jurisdictional High Court in the case of CIT Vs Atlas Cycle Industries (supra) held as under: “9. Adverting to the question referred regarding the reassessment proceedings, we are of the view that the Tribunal was right in cancelling the reassessment as both the grounds on which reassessment notice was issued were not found to exist, and the moment such is the position, the ITO does not get the jurisdiction to make a reassessment. This view of ours finds support from the Supreme Court decisions in CIT vs. A.

In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 16/01/2019)