Loading judgment…
Facts
The assessee filed a return declaring a loss, which was processed. Subsequently, information suggested the assessee received ₹2,01,87,000/- from M/s Sheetal Steel through shell companies, leading to a reopening of the assessment under Section 147. The Assessing Officer (AO) made an addition of ₹50,55,000/- under Section 69A, but the Pr. Commissioner of Income Tax (PCIT) found that a significant amount of ₹2,01,87,000/- from Sheetal Steel was not added back, deeming the Section 147 assessment erroneous and prejudicial to revenue, and initiated revisionary proceedings under Section 263.
Held
The Tribunal held that the Section 148 notice for reopening the assessment was invalid as it lacked the signature of the AO, either manual or digital, thereby rendering the subsequent Section 147 assessment null and void. Consequently, the revisionary proceedings initiated by the PCIT under Section 263, being consequential to an invalid assessment, were also deemed invalid. The Tribunal further noted that the assessee's replies to the PCIT's show-cause notice were not considered, which also vitiated the revisionary action.
Key Issues
Whether an unsigned notice under Section 148 renders the Section 147 assessment invalid, and consequently, whether the Section 263 revisionary proceedings based on such an invalid assessment are also invalid. Also, whether non-consideration of the assessee's replies by the PCIT invalidates the revisionary order.
Sections Cited
263, 147, 148, 69A, 148(2), 148A, 149(1)(b), 192B, 292B, 34, 271(1)(a), 282, 116, 117, 143(3), 142(1), 14A, 8D, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
O R D E R
Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the Pr. Commissioner of Income, Kolkata-2 (hereinafter referred to as the “PCIT)”] dated 21.03.2024 for the AY 2013-14.
The assessee has challenged the revisionary order passed u/s 263 of the Income-tax Act, 1961 (the Act) by PCIT to be invalid and nullity on the ground that the same is consequential proceeding to an invalid assessment framed u/s 147 of the Act on the basis of invalid notice issued u/s 148 of the Act by ITO, Ward-6, Kolkata.
The facts in brief are that the return of income was filed on 28.09.2013, declaring a loss of ₹5,144/- which was duly processed on 02.03.2024. Subsequently, after receiving information from DDIT (Investigation), Unit-4(2), Kolkata alleging that assessee has received ₹2,01,87,000/- from M/s Sheetal Steel (Prop. Shri Pulak Saha)
The ld. PCIT thereafter on perusal of the assessment order noted that the assessment u/s 147 of the Act was based on the information that assessee has received money from different sources namely M/s Sheetal Steel of ₹2,01,87,000/-, Dhanlaxmi Trading Co. of ₹27,00,000/-, City Sarees of ₹23,55,000/- aggregating to ₹2,52,42,000/-. According to PCIT, the ld. AO on the basis of partial documents furnished by the assessee, added only ₹50,55,000/- u/s 69A of the Act to the income of the assessee instead of Rs. 2,52,42,000/- and calculated the taxes accordingly. Therefore, the amount received from M/s Sheetal Steel amounting to ₹2,01,87,000/- was not added back, whereas the said amount was clearly mentioned by the ld. AO in Para 2 of page no.2 that income has escaped to that extent. According to PCIT, this has resulted in under assessment of income to the tune of ₹2,01,87,000/- and loss of revenue to the tune of ₹1,32,30,337/-, rendering the assessment framed u/s 147 of the Act, as erroneous and prejudicial to the interest of the Revenue.
The ld. AR vehemently submitted before the Bench that the assessment framed u/s 147 of the Act vide order dated 28.09.2021, is invalid and ex-facie, nullity in the eyes of law on several scores and therefore, the consequential revisionary proceeding initiated by the ld. PCIT is also invalid and bad in law. In defense of his arguments, the ld. AR stated that the consequential proceedings would be invalid and the assessee can challenge the validity of the assessment framed in the co-lateral/consequential proceedings. The ld. AR in defense of his arguments relied on the decision of Hon'ble Calcutta High Court in case of Keshab Narayan Banerjee Vs. CIT [1999] 238 ITR 694 (Calcutta)/[1999] 156 CTR 109 (Calcutta) and M/s Classic Flour & Food Processing Pvt. Ltd. Vs. CIT, Kolkata in to 766/KOL/2024 vide order dated 05.04.2017, Concord Infra Projects Pvt. Ld. Vs. PCIT in vide order dated 13.10.2024. The ld. AR therefore prayed that the assessee is within its legitimate and lawful right to challenge the assessment framed u/s 147 of the Act even in the collateral proceeding as has been held in the aforesaid decisions.
i. The ld. AR, by referring to the notice u/s 148 of the Act dated 20.03.2020, a copy of which is available at page no.9 of the Paper Book, submitted that the same is without signature of the Asima Mondal, Kolkata, which was not signed or digitally signed and therefore, when the said notice is unsigned, is bad in law. Thus there is no service of valid notice on the assessee. In defense of his argument, the ld. AR relied on the decision of Prakash Krishnavtar Bhardwaj Vs. ITO, in WP 9835 of 2022, order dated 09.01.2023 (Bom), PCIT Vs. Kesoram Industries Ltd. [2020] 423 ITR 180 (Calcutta) vide order dated 2nd August, 2019,Manoj Jain, Kolkata vs I.T.O. vide order dated 11 .07.2024.The ld. AR therefore prayed that on the ground of notice issued u/s 148 of the Act being unsigned either manually or digitally, rendering the said notice as invalid and so is the assessment framed u/s 147 of the Act. ii. Second limb of argument is that at page no.2 of the revisionary order, the ld. PCIT has noted that the order passed u/s 147 of the Act dated 28.09.2021, by the ld. AO was erroneous and prejudicial to the interest of the Revenue and accordingly, issued notice u/s 263 of the Act on 08.01.2024, fixing the hearing on 17.01.2024.The ld. PCIT further stated that the notice was served upon on 08.01.2024 and none appeared for hearing on 17.01.2024, and also on the next date 09.02.2024 and till date. The ld. iii. Arguing on the third proposition, the ld. Counsel for the assessee ,by referring to reasons recorded u/s 148(2) of the Act copy of which is available at page no. 12 of the Paper Book, stated that the ld. AO has mentioned in the reasons that assessee is beneficiary of ₹2,01,87,000/- and accordingly, the assessment has escaped within the meaning of Section 147 of the Act. The ld. AR thereafter referred to the reply filed by the assessee before the ld. AO dated 16.09.2021, as evidenced from the e-proceedings response acknowledgement dated 16.09.2021, a copy of
7. The ld. DR on the other hand, relied on the order passed by ld. PCIT by stating that the notice u/s 148 of the Act sent through e-mail is not required to be signed by the ITO and therefore, the assessment cannot be termed as invalid and nullity on the basis of unsigned notice. So far as other contentions of the assessee are concerned, the ld. CIT DR fairly relied on the order of PCIT.
After hearing the rival contentions and perusing the materials available on record, we are of the considered opinion that the assessee has a legitimate right to challenge the validity of the assessment framed u/s 147 of the Act even in the consequential and collateral proceedings. In the present case, the assessee has challenged the revisionary order passed by the ld. PCIT to be invalid and bad in law on the ground that it being consequential to the assessment framed u/s 147 of the Act dated 28.09.2021, which is itself nullity and bad in law on the ground that the unsigned notice issued u/s 148 of the Act, a copy of which is available at page no.9 of the Paper Book, is not signed either manually or digitally and therefore, notice without the signature of the ld. AO is invalid and so is the consequential assessment framed by the ld. Assessing Officer.
“8. We have heard the learned counsel for the parties and perused the record of the petition.
It is the submission of the learned counsel for the petitioner that on perusal of the affidavit-in-reply of the respondents, there appears to be no categorical denial to the statements made by the petitioner that he has not received an order dated 02.04.2022 passed under clause (d) of Section 148A of the Act, rejecting the petitioner’s submission and holding the petitioner’s case to be one fit for issuing notice u/s.148 of the Act. Similarly, there is no substantial denial to the fact that the notice issued u/ s.148 dated 02.04.2022 was unsigned both digitally and manually and was never received by the petitioner by e-mail or for that matter even uploaded onto the system via e-mail. Further, a copy of the said unsigned notice was received by the petitioner by speed post only on 16.04.2022.
It is, therefore, the contention of the petitioner that the notice u/s.148 being an unsigned notice, the same is invalid and consequently proceeding on the basis of an invalid notice vitiates the entire reassessment proceedings as the same is without any jurisdiction. It is further the argument of learned counsel for the petitioner that proceeding on the basisof an invalid notice, which in any case, has been issued after three years from the end of the relevant assessment year, as required under the provisions of section 149(1)(b) of the Act, constitutes a jurisdictional error on the part of the respondents.
Learned counsel for the petitioner makes a reference to a Division Bench judgment of the High Court of Calcutta in Commissioner of IncomeTax v. Aparna Agency (P.) Ltd.1 to contend that the provisions of section 192(B) of the Act do not provide for a cure when the notice under the Act is invalid by virtue of it not having a signature affixed as is required under the relevant provisions. He further refers to another judgment of the High Court of Calcutta in B.K. Gooyee v. Commissioner of Income-tax2 and a judgment of a Division Bench of the Madhya Pradesh High Court in Umashankar Mishra v. Commissioner of Income-tax3 for the proposition that absence of a signature on notice is an invalid notice in the eyes of law and such an infirmity amounts to no notice at all.
Per contra, Mr. Ajeet Manwani, learned counsel for the respondents submits that assuming the notice u/s.148 of the Act was unsigned manually or digitally as is clear from the original record, this fact would not, by itself vitiate further proceedings in the matter, as according to him, provisions of Section 292B of the Act could cure this defect or mistake. He argues that applying the provisions of section 292B of the Act, the notice which is mistakenly not signed, would not be vitiated; since in any event the unsigned notice, at a later point of time, was sent to the petitioner by courier.
Learned counsel for the respondents refers to a judgment of the Delhi High Court in Sky Light Hospitality LLP v. Assistant Commissioner of Income-Tax4 and that of the Calcutta High Court in Commissioner of Income-Tax v. Anand And Co.5 in aid of his argument that even if the signatures were not applied on the notice, the authenticity of the notice was not denied; he argues that if the petitioner does not deny the authenticity of the notice, he has waived his right to raise an objection to its validity.
“We, therefore, are of the view that there is neither any material which could justify the inference or finding that service by registered post was either effected or should be deemed to have been accomplished nor was this the case of the respondents before the learned single judge and thus the learned single judge erred in law in returning such a finding. We have, therefore, no hesitation in holding that the service by registered post of the notices allegedly sent to the appellant writ applicant, resulting in the passing of the order under section 147 of the Act was not properly effected or accomplished. Since, admittedly, the service of such notices was a necessary pre-requisite, a condition precedent for passing of the orders under section 147 of the Act, we also have no hesitation in holding that such orders were bad in law, and, therefore, the proceedings under section 263 of the Act, admittedly, originating from such orders could not be initiated against the appellants. The service of such notices, therefore, not having taken place, the Commissioner of Income-tax was not in law justified to invoke his jurisdiction under section 263 of the Act. On an overall consideration, therefore, we do not find ourselves in agreement with the view taken by the learned single judge that the notice under section 147/148 of the Income-tax Act was properly served by registered post. We set aside such finding of the learned single judge and because the entire basis of the operative part of the judgment of the learned single judge proceeded on the premises of due service of the registered cover, contents being subject to proof, such basis having been knocked out, nothing survives in so far as the operative part of the judgment under appeal is concerned. The judgment under appeal, therefore, is set aside in so far as the operative part is concerned. The appeal accordingly is allowed, but without any order as to costs.
11. Similarly, the co-ordinate Bench in M/s Classic Flour & Food Processing Pvt. Ltd. (supra), & in the case of Concord infra project Pvt. Ltd. (supra), the co-ordinate Bench as held as under:-
“After having considered the judicial precedent on the issue we are of the view that the validity of the order passed by the AO which is being interdicted by the Ld. PCIT in the impugned order assailed before us, can be examined as to whether the AO had the requisite jurisdiction to re-open/re-assess the escaped income of the assessee. Therefore, in this case we need to examine the action of AO dated 29.12.2017 passed u/s 147 of the Act which action of AO depends upon the AO assuming validly the jurisdiction to pass an order of assessment u/s 147 of the Act. It is settled law that the AO can reopen the assessment only after fulfilling the conditions laid down in the said section (section 147 of the Act) namely reason to believe that income chargeable to “5. In the present case, four broad aspects were questioned before the Tribunal. By the order impugned dated November 4, 2016, the Tribunal held in favour of the assessee.
The first aspect pertains to an order under Section 143(3) of the Act which was found to be erroneous and prejudicial to the interest of the Revenue. The specific matter pertained to the difference in the addition of fixed assets of about Rs.1.10 crore. The notice under Section 263 of the Act was issued to clarify the difference. The assessee clarified the difference by its written submission and a reconciliation statement was also used. However, the Commissioner, instead of considering the reply, recorded that the issue had not been verified by the assessing officer.
The Tribunal set aside the decision of the Commissioner on the ground that the show-cause notice indicated a specific purpose but the matter was dealt with on another count after the receipt of the reply. The Tribunal relied on a view taken by a coordinate bench in Vesuvius India Ltd. v. CIT [2012] 23 taxmann.com 425/54 SOT 172 (URO) (Kol.) and a judgment of the Andhra Pradesh High Court in CIT v. G.K.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11.02.2024.