M/S. BOUTIQUE INTERNATIONAL PVT. LTD.,DELHI vs. ITO, NEW DELHI

impugned order dated 11.01.2017 passed by the Ld. CIT(A)-35, New Delhi in relation to assessment year 2013-14 on the following grounds:-

1. That on the facts and in the circumstances of the case and in law, AO erred in issuing notice u/s. 143(2) on the basis

of CASS, which is not in accordance with jurisdictional conditions stipulated under the act.

by the AO on the adhoc basis (without doubting audited defect free books of accounts), on basis of mere estimate by substituting 60% disallowance made by AO with 40%

(on foreign travel expenses and business promotion expenses).

3. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not deleting the addition made

by AO in toto, without appreciating the replies and evidences filed before him by the assessee.

4. That the appellant craves leave to add / alter any/ all

grounds of appeal before or at the time of hearing of the appeal.

2. The assessee has also raised the following additional grounds:-

The Assessee was asked to furnish the complete details alongwith the corresponding bills / vouchers of expenses incurred on foreign visit and business promotion. In response to the same, assessee filed its details with the written submission dated 30.11.2015. The AO noticed that details furnished by the assessee regarding spouses of both Directors has also accompanied them on the foreign visit. The documentary evidences supporting the same were incomplete and assessee has not explained about the expenses with 4 necessary evidences of the expenditure incurred wholly and exclusively for the purpose of business. In response to the same, assessee furnished the written submissions dated 28.2.2015; 29.12.2015 and 15.1.2016. After examining the same the AO disallowed out of expenses on foreign travel amounting to Rs. 35,23,993/- and expenses on business promotion amounting to Rs. 6,85,217/- and made the total taxable income of the assessee amounting to Rs. 59,90,669/- by completing the assessment at Rs. 59,90,669/- u/s. 143(3) of the Act vide order dated 27.1.2016. Aggrieved with the assessment order, assessee appealed before the Ld. CIT(A), who vide its impugned order dated 11.01.2017 has partly allowed the appeal of the assessee. Now the assessee is aggrieved with the impugned order and raised the original grounds of appeal as well as additional grounds of appeal, as reproduced above before the Tribunal.

4.1 It was further submitted that the assessment framed u/s. 143(3) of the Act for the period under consideration is void ab initio and the impugned order is also deserve to be cancelled, because it is based upon on the illegal assessment order. Ld. Counsel for the assessee further stated that assessee has submitted its return of income u/s. 139(1) of the Act on 28.9.2013 and the assessment u/s. 143(3) of the Act for the period under consideration which was framed by the ITO, Ward 5(1), New Delhi is also time barred because the mandatory notice u/s. 143(2) of the Act dated 8.9.2015 is beyond the time limit under the provisions of the Act. Hence, he requested that assessment in dispute may be quashed by accepting the appeal filed by the assessee on this ground only.

He finally stated that assessee has filed the written submissions alongwith the case laws in the shape of paper book as well as in the written submissions, the same may be read as part of his arguments. In support of his contention, he cited the various decisions viz. Apex Court decision in Singhad Technical Society (order dated 29.8.2017) 397 ITR 344; Hon’ble Delhi High Court decision in the case of Fast Booking I Pvt. Ltd. order dated 2.9.2015 (ITA No. 334/2015) 378 ITR 693; Hon’ble Delhi High Court decision in case of Silver Line order dated 4.11.2015 (ITA No. 578/2015) 383 ITYR 455; Hon’ble Punjab & Haryana High Court decision in the case of M/s VMT Spinning Co. Ltd. order dated 16.9.2016 (ITA No. 445/2015) 389 ITR 326; Hon’ble Gujarat High Court in case of Jolly Fantasy World Ltd. 383 ITR 530 and the ITAT, SMC Bench, Delhi decision in the case of Manish Kumar & Sons HUF vs. ITO Ward 1(5), New Delhi dated 22.1.2018 in (AY 2015-16).

4.2 On the contrary, Ld. DR relied upon the orders of the authorities below and stated that the concerned AO has issued notice u/s. 143(2) of the Act within time which is within his jurisdiction and stated that no interference is called for in the well reasoned orders passed by the revenue authorities and appeal filed by the assessee may be dismissed.

5.1 We find that assessee filed its return of income u/s. 139(1) of the Act on 29.8.2013 and the AO i.e. DCIT, Circle 3(1), New Delhi issued notice u/s. 143(2) of the Act on 04.9.2014. Thereafter by transfer memo, AO stated the reason for transfer the case from DCIT, Circle 3(1) to ITO, Ward 5(1), New Delhi is returned income before Rs. 30 lacs which correlates to CBDT Instruction NO. 1/2011 dated 31.1.2011. The correct AO i.e. ITO, Ward 5(1), New Delhi has issued noticed u/s. 143(2) of the Act dated 08.9.2015 which is time barred, hence, the assessment order dated 27.1.2016 passed by the ITO, Ward 5(1), New Delhi is without jurisdiction and void ab initio. Therefore, in our view the impugned order passed by the Ld. CIT(A) deserve to be cancelled, because it is based upon the illegal assessment order. We find that similar issue has been dealt and adjudicated by the ITAT, SMC Bench, Delhi in the case of Manish Kumar & Sons HUF vs. ITO Ward 1(5), New Delhi dated 22.1.2018 in (AY 2015-16) and decided the similar issue in favour of the assessee, wherein the Tribunal has decided as under:-

“9. I have heard both the parties and perused the records, especially the Paper Book filed by the Assessee’s counsel and all the case laws cited by him. I note that assessee filed his return of income on 12.3.2016 of Rs.4,15,280/- Page No. 4 of the Paper Book with address mentioned as “ A- 48

Omaxe RPS Green Valley Sector 41-42 Faridabad

Haryana 121001”. This case was selected for scrutiny u/s 143(2) of the Act vide notice dated 26.07.2016 issued by DCIT Circle II Hazaribagh (Page No. 6 of the Paper Book). Since assessee was regularly filing return from AY 2012-2013 onwards at Faridabad same Address so he requested that case should be transferred to Faridabad as jurisdiction lies with Faridabad only due to which case was transferred to Faridabad AO as admitted in first para of AO order, vide order u/s 127 dated 28.03.2017 passed by PCIT

Hazaribagh. For the sake of convenience, para first of the assessment order is reproduced below:-

“Return declaring income of Rs. 415280/- was e-filed by the assessee on 12.3.2016.The case was selected for scrutiny under CASS (Computer Assisted Selection Scrutiny). After taking the case into scrutiny notice under section 143(2) of the Income Tax Act (in short “Act”) dated 26.07.2016 issued by the DCIT, Circle-II, Hazaribagh Faridabad to the assessee through speed post vide dispatch No. 2551 dated 26.7.2016 fixing the case for hearing 10 on 17.8.2016. On the fixed date, assessee attended the proceeding and filed written reply wherein stated that the assessee is regularly filing the income tax return at Faridabad address only and requested to transfer his case to the Faridabad AO. After passing order u/s. 127 of the Act by the Pr. CIT, Hazaribagh vide its order Fine.CIT/HZB/Tech/ u/s. 127/2016- 17/3081-87 dated 28.3.2017, the case of the assessee was transferred to this office on 30.9.2017. On receipts of case on transfer, notice u/s. 142(1) read with section 129 of the Act was issued on 14.10.2017 fixing the case for hearing on 20.7.2017. In response to the notice issued, Sh. Dinesh Kumar Aggarwal, FCA attended the proceedings and filed written reply. Asked to furnish the rest of the information as asked for vide u/s. 142(1) of the Act. Request for adjournment. On his request, case was adjourned to 21.8.2017.”…..

9.1 After perusing the aforesaid contents of the assessment order mentioned in para first of the said order, it is crystal clear that without any valid notice issued u/s 143(2) of the Act by Faridabad AO, impugned assessment is framed by ITO Ward 1(5)

Faridabad, simply in extension to proceedings initiated by Hazaribagh DCIT Circle 2 who is admittedly not AO of assessee within meaning of section 2(7A) of the Act on date of issue of notice u/s 143(2) of the Act. So on this short count itself impugned proceedings deserves to be quashed being unsustainable in the eyes of law. I further note that the case laws cited by the ld. counsel for the assessee are applicable in the present case.

However, the most direct decision of the ITAT, Delhi (E-Bench)l was decided in case of Al Faheem Meatex Pvt. Ltd. vs. ACIT in & 6123/Del/2015 (Ayrs. 2010-11 & 2011-12) vide order dated

09.6.2017 which is directly applicable in the present case. The Tribunal in the case of Al Faheem Meatex

Exports Pvt Ltd (supra) vide para No. 6 has held as under:-

“6. We have carefully consider the rival contentions and perused the copies of the return filed before us by the assessee. The first paragraph of the assessment order speaks that notice under section 143(2) was first issued by the DCIT, Circle, Ghaziabad on 29.8.2011.

Admittedly, the notice should have been issued on or before 30th September, 2011 and it was issue don 29.8.2011. However, the question is whether the notice was issued by the correct jurisdictional officer or not. In the present case as mentioned by the AO himself that the case was subsequently transferred to the Assessing

Officer as per the actual jurisdiction on 07/09/2012 and subsequently he issued notice under section 143(2) on 20.9.2012. From the above facts, it is apparent that first notice was issued by the DCIT, Ghaziabad on 29/08/2011, who was not having jurisdiction over the assessee. It is the legality of this notice that is required to be tested. According to the 13 provisions of section 143 (2) of the act the notice for verifying the return of income is required to be issued by the ‘assessing officer’.

The assessing officer has been defined under section 2 (7A) of the act, which means the assistant Commissioner or the deputy

Commissioner or assistant director or Deputy

Director or the income tax officer who is vested with the relevant jurisdiction by the virtue of directions order issued under subsection (1) or subsection (2) of section 120 or any other provisions of the act and additional

Commissioner or additional director or joint

Commissioner or joint director who is directed under clause (b) of subsection (4) of that section to exercise or perform all or any of the powers and functions carried on or assigned to an assessing officer under this act. Before us, no such directions issued under section 120 (1) or (2) issued in favour of DCIT, Ghaziabad was produced. In view of this, we are unable to hold 14 that at that relevant time he was holding jurisdiction over the assessee. As the original jurisdiction over the assessee by the DCIT,

Ghaziabad could not be established the provisions of section 127 of the act are not applicable. Further, the provisions of section 124 (3) also does not come to the rescue of the revenue because in the present case the assessee is filed return of income showing the address of Meerut and subsequently according to the assessing officer actual jurisdiction lies with him, but the impugned notice issued under section 143 (2) was issued on 29/08/2011 by DCIT, circle Ghaziabad. Therefore, it is apparent that notice under section 143 (2) which should have been issued by 30/09/2011 by the correct jurisdictional officer was not issued.”

9.2 I further note that the aforesaid Division Bench decision was duly followed by the SMC Bench, in the case of Sh. Yogesh Yadav vs. ITO passed in ITA No.

1757/Del/2016 (AY 2011-12) vide order dated

09.10.2017 being the identical facts / reasoning with Ltd. (Supra) and accordingly assessment framed as declared as void-ab-initio.

precedents being the identical facts of the present case, I hold the present assessment is void ab inito, hence, the same is quashed and accordingly, the additional legal ground raised by the assessee is allowed. Since I have quashed the assessment on the legal ground itself, the other grounds on merit became academic, hence, need not be adjudicated.

The decision is pronounced on 18.12.2020.