DEEPAK GUPTA & SONS (HUF),NEW DELHI vs. ITO WARD - 46(2), NEW DELHI

PER H.S. SIDHU, JM:

1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. CIT(A) is bad in law.

2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Assessing Officer of passing order u/s. 147 Income Tax Income Tax Act, 1961 (hereinafter referred to as "the Act"), 1961. The said order passed by the Assessing Officer is void ab initio on, inter alia, the grounds that: a) Assumption of jurisdiction under section 148 is bad in law as the Assessing Officer did not apply his mind on the information received by him and the reasons recorded by him is not valid; and b) It is based on factually erroneous premises and built upon surmises and conjectures.

3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Assessing Officer of making addition of INR 39,96,550/- being the entire credit in the bank account which was relating to trading activities and other transactions relating to the earning of commission income. 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Assessing Officer of considering the credit in the bank account in a highly arbitrary manner and totally disregards the corresponding

withdrawals which clearly establish the activities and scope of income. 5. Without prejudice to the above grounds, addition if any called for, should only be in respect of peak credit. 6. The appellant craves leave to add, alter, amend and/ or modify any of the ground ground(s) during or before the hearing of the appeal.

2.1 The Assessing Officer examined the documentary evidences filed by the assessee alongwith the reply filed by the assessee and was of the view that entire transaction is bogus and cash deposit in the bank from undisclosed sources and therefore, made the addition of Rs. 39,96,550/- by completing the assessment u/s. 147/143(3) of the I.T. Income Tax Act, 1961 vide order dated 19.12.2018. Aggrieved by the aforesaid assessment order, the assesee appealed before the Ld. CIT(A) who vide its impugned order dated 02.9.2019 has partly allowed the appeal of the assessee. Against the impugned order dated 02.09.2019, assessee is in appeal before the Tribunal.

2.2 At the time of hearing, Ld. Counsel for the assessee narrated the facts of the case and only argued the legal issue regarding the assumption of jurisdiction u/s. 147 of the Income Tax Act, 1961 by the Assessing Officer which is bad in law, because the Assessing Officer has not applied his mind before issuing the notice u/s. 148 of the Income Tax Act, 1961 by stating that assessee has not filed return of income for the assessment year in dispute meaning thereby before issue of notice u/s. 148 of the Income Tax Act, 1961, the Assessing Officer has not applied his mind, therefore, the reassessment framed by the Assessing Officer is without jurisdiction, bad in law and without application of mind and therefore, is liable to be quashed.

2.3 Ld. Counsel for the assessee further draw our attention towards Paper Book filed by the assessee containing pages 1- 98 in which he has attached various documentary evidences for substantiating the claim of the assessee. He especially draw our attention towards the written submissions filed by the assessee before the ld. CIT(A) which are at pages 43-45 of the aforesaid paper book in which it was clearly stated that assessee is a small cloth trader having income from trading activities and commission. In this case, original return was filed on 30.7.2011 in accordance with provisions of section 139(1) of the Income Tax Act, 1961. During the year under reference, total deposit in the bank account was Rs. 39,96,550/- as admitted by the Assessing Officer himself in the assessment order u/s. 147/143(3) of the Income Tax Act, 1961 dated 19.12.2018. But at the time of issuing the notice, the Assessing Officer has disregarded all the facts which is already on record and without any evidence or material, the Assessing Officer issued notice for initiating the reassessment proceedings u/s. 148 of the Income Tax Act, 1961 on the alleged ground that the assessee deposited cash in his bank account to the extent of Rs. 1,76,65,999/- as borne out from reasons recorded by Assessing Officer which is placed at page no. 1 of the paper book. Ld. Counsel for the assessee further stated that assessee has sought the intimation under RTI Income Tax Act, 1961 and established that such allegations were false, misleading and contrary to the facts. Complete details of bank account has already been placed in the paper book at page no. 16-17 and as per the bank statement, total credit balance at the end of the year is Rs. 6451.03 which has been overlooked by the Assessing Officer at the time of issuing the notice u/s. 148 of the Income Tax Act, 1961. Ld. Counsel for the assessee further draw our attention towards the reasons recorded by the Assessing Officer in which the Assessing Officer has stated that assessee has not filed any voluntary return whereas as stated above, the assessee has already filed the return of income as stated by the Assessing Officer in the assessment order also and Ld. Counsel for the assessee stated that the notice issued by the Assessing Officer is without application of mind and without going through the material already on record with the Assessing Officer, therefore, the assessment in dispute is bad in law and deserve to be cancelled. He further draw our attention towards the paper Book page no. 94-98, which is a copy of decision of the Hon’ble Delhi High Court in the case of Pr. CIT vs. RMG Polyvinyl reported in (2017) 83 taxmann.com 348 (Delhi)/ 396 ITR 5, especially the para no. 5 thereof and stated that in view of the aforesaid decision of the Hon’ble Delhi High Court the reassessment in the present case may be declared as bad in law and accordingly may be cancelled.

“5. As it transpired subsequently there were at least two glaring errors in the above reasons. The first error was that the Assessing Officer proceeded on the basis that “no return of income is available in the AST database of Income Tax Department. Therefore, it is clear that the assessee has not filed return of income for the A.Y. 2004-05 and consequently has not offered any income for taxation.” In 30th the assessment order dated December, 2011 passed consequent upon the reopening of the assessment, the very first line states that “the Assessee had filed return declaring income of Rs. 4,38,958/- on 31.10.2004 which was processed under Section 143(1) of the Act on 04.01.2005.”

4.1 We are of the considered view that the reasons recorded by the Assessing Officer is based on presumption and without application of mind by stating therein that assessee has not filed its return of income whereas the evidences produced by the assessee in the shape of paper book before the Ld. CIT(A) as well as before the Tribunal, establish that the assessee has filed the return of income for the assessment year in dispute, hence, the aforesaid decision of the Hon’ble Delhi High Court in the case of Pr. CIT vs. RMG Polyvinyl reported in (2017) 83 taxmann.com 348 (Delhi)/ 396 ITR 5 is squarely applicable here and therefore, applying the said ratio, the reassessment in the present case is bad in law and accordingly quashed and appeal of the assessee is allowed.

The decision is pronounced on 09.11.2020.