SHARDA SHARMA,GB NAGAR vs. PR. CIT, NOIDA

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ITA 327/DEL/2020Status: DisposedITAT Delhi05 November 2020AY 2009-104 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a wrong show-cause notice cannot lead to a right action. Since the PCIT continued proceedings with an incorrect show-cause notice after the assessee pointed out the error, the order passed under Section 263 was deemed liable to be dismissed.

What were the facts?

The assessee's assessment proceedings for AY 2009-10 were initially dropped. The PCIT later initiated proceedings under Section 263, believing the Assessing Officer's order was erroneous as the source of a cash deposit was unsubstantiated. The PCIT issued a show-cause notice citing a sale of property in Noida, which the assessee denied.

What were the issues?

Whether an order passed under Section 263 is void ab initio if based on a flawed show-cause notice and whether the PCIT's action constituted a 'change in opinion'.

Which sections of the Income-tax Act were involved?

Section 263,Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI

Before: Sh. Sudhanshu SrivastavaDr. B. R. R. Kumar

Hearing: 22.10.2020Pronounced: 05.11.2020

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the assessee against the order of the ld. PCIT, Noida dated 29.03.2019.

2.

Following grounds have been raised by the assessee:

1. For that in the facts and circumstances of the case, the ld. CIT erred in violating the principles of natural justice by not the mentioning the grounds for initiating action u/s 263 Income Tax Act, 1961 in the show cause notice issued. As such, the order passed u/s 263 is void ab-initio. The action of the ld. CIT was wholly unreasonable, uncalled for and bad in law.

2. For that in the facts and circumstances of the case, the ld. CIT erred in not passing a speaking order against the submissions of your appellant. As 2 Sharda Sharma such, the order passed u/s 263 is void ab-initio. The action of the ld. CIT was wholly unreasonable, uncalled for and bad in law.

3. For that in the facts and circumstances of the case, the order u/s 263 is merely ‘change in opinion’. The order u/s 143(3) passed by the ld. AO does not in any way represent erroneous order. The action of the ld. CIT was wholly unreasonable, uncalled for and bad in law.

4. For that in the facts and circumstances of the case, the ld. CIT erred in dropping and quashing the assessment proceedings on the basis of show cause notice in which irrelevant details are there and even in the order also material facts are wrongly quoted.”

3.

The case of the assessee for AY 2009-10 was reopened u/s 147 of the Income Tax Act, 1961 on the basis of the reason that the assessee had deposited cash of Rs.22,35,000/- into her bank account. However, after scrutiny of the case, the Income Tax Officer, Ward-3(4), Noida by an order (in the order sheet itself) dated 15.12.2016 dropped the assessment proceedings initiated u/s 147 of the Act.

4.

The ld. PCIT, on subsequent examination of the assessment records for the year under consideration, opined that the source of cash deposit of Rs.22,35,000/- was not properly explained by the assessee as sale proceeds from sale of property situated at Plot No. 172, Sector-64, Faridabad and the assessee did not furnish any other document, such as copy of sale deed/agreement to sale to prove the claim. The ld. PCIT opined that the cash deposit of Rs.22,35,000/-, thus remained unsubstantiated. Since, the Assessing Officer accepted the claim of the assessee without conducting any enquiry in the matter, the ld. PCIT held that order of the Assessing Officer is 3 Sharda Sharma erroneous and prejudicial to the interest of revenue. Owing to initiation of proceedings u/s 263, a notice was issued to the assessee by the Ld. PCIT vide letter F.No.Pr.CIT/Noida/ITO (T)/Review-u/s 263/2018-19/11601 dated 14.03.2019. The said notice reads as under:

“On an examination of your assessment records for the year under consideration, it is seen that you had deposited cash of Rs.22,35,000/- in your savings bank account and the source thereof was explained by you as the sale receipts of the property situated at Plot No. 172, Sector-64, Noida. In support of the claim, you had furnished final transfer letter dated 27.04.2010. However, no other document, such as copy of sale deed/agreement to sale was furnished by you in the absence of which the receipt of cash of Rs.22,35,000/- remained unsubstantiated. In such a situation, the action of the Assessing Officer in accepting your claim was not justified.”

5.

Before us, during the hearing, the ld. AR reiterated the argument taken up before the ld. PCIT which finds mention at para 5.0 of the order u/s 263 of the ld. PCIT reads as under:

“With reference to above, I want to say that assessee had deposited the cash and explain the same, but Sir, might be here is some confusion because the property mentioned in notice was not belong to us and either we sold that property. And also, there was no order passed under any section of Income Tax Act, 1961 for the relevant assessment year i.e. 2009-10 for revision u/s 263.”

6.

The ld. DR argued that the word “Noida” in the show cause notice may be read as “Faridabad” and argued that the order of the ld. PCIT is correct on substance.

4 Sharda Sharma 7. Heard the arguments of both the parties and perused the material available on record.

8.

The issue before us is whether a wrong show-cause notice can lead to a right action. The obvious answer would be “No”. In the instant case, when the assessee brought to the notice of the ld. PCIT that there was no such sale of property situated at Noida, the ld. PCIT in all fairness and fitness of things ought to have issued a right show-cause notice instead of continuing the proceedings with a wrong show-cause notice. It demonstrates that the revenue has no unambiguous idea as to the reason of invocation of Section 263. Hence, the order passed subsequently u/s 263 by the ld. PCIT is liable to be dismissed.

9.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 05/11/2020.

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