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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAVISH SOOD
ORDER PER RAVISH SOOD, J.M: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-25, Mumbai, dated 11.04.2019, which in turn arises from the assessment order passed by the A.O under Sec. 144 r.w.s 147 of the Income Tax Act,1961 (for short ‗Act‘), dated 10.11.2018. The assessee has assailed the impugned order on the following grounds of appeal before us: ―1. In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the Assessment order passed u/s 144 read with section 147 of the IT Act,1961 on the basis of notice issued u/s 148 on the completely incorrect address of the appellant without complying with rule 127 of the IT Rules i.e. to examine the PAN Database to ascertain the correct address of the appellant. Your appellant therefore prays that the assessment/reassessment complete in mechanical order by the Ld. AO be quashed as being null and void.
2 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5)
In the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the impugned notice issued by the Ld. Assessing officer u/s 148 and u/s 142(1) was never received by the Appellant and therefore he was prevented by reasonable and sufficient cause for non compliance of the aforesaid notices. Your appellant therefore prays that the assessment/reassessment completed without serving the notice u/s 148/142(1) be quashed as being null and void.
In the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) erred in confirming the assumption and presumption of the basic income at Rs.1,60,000/- and addition of Rs.16,74,860/- thereto made by the Ld. Assessing Officer u/s 69A on account of cash deposited by the appellant during the year. Your appellant therefore prays that the assessment/reassessment completed by the Ld. AO merely on the basis of assumptions and presumptions and without appreciating the facts be quashed. 4. In the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the impugned cash deposit of Rs. 16,74,860/- is made out of cash withdrawals as well as cash Sales during the year on account of small cloth trading business being operated from appellant's house only. 5. In the facts and circumstances of the case and in law ,the Ld. CIT(A) ought to have appreciated that the appellant being a senior citizen and a small cloth dealer operating from his house only having small sales turnover of around Rs. 16 lakhs is not required to maintain any books of accounts u/s 44AD of the IT Act and his business income could have been assessed u/s 44AD at Rs.1,34,000/- being 8% on the gross sales at Rs. 16,74;860/- considered as cash deposits in the bank by the Ld. Assessing officer. 6. In the facts and circumstances of the case and in law, the Ld. CIT(Appeals) failed to appreciate that the Appellant's total income during the previous year 2010-11 relevant to the Assessment year 2011-12 never exceeded the maximum amount chargeable to income tax and hence he was not required to file the Return of Income u/s 139(1) of the IT Act.,1961. 7. In the facts and circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) erred in not considering and dealing with the case laws cited by the Appellant vide the written submissions filed during the course of hearing of the Appeal before the Hon. CIT Appeal. 8. The appellant craves leave to amend, alter or delete or add to all or any of the above grounds of appeal
or furnish fresh grounds of appeal and make the detailed submissions on each of the grounds on or final hearing of Appeal.‖
2. Information was received by the A.O that the assessee during the year in question had made cash deposits of Rs.16,74,860/- in his saving bank account with Cosmos Co-operative Bank, Branch : Ghatkopar, Mumbai. As the assessee had not filed his return of income for the year in question thus, the A.O being of the view that the income of the assessee chargeable to tax had escaped assessment reopened his case under Sec. 147 of the Act. Notice under Sec. 148, dated 21.03.2018 was issued to the assessee but the same was returned unserved. Subsequently, a notice under Sec. 142(1), dated 28.08.2018 was issued by the A.O wherein the assessee was called upon to furnish certain details latest by 12.09.2018. However, the said notice too was returned unserved. In the backdrop of the aforesaid facts the A.O issued a letter 3 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5) under Sec. 133(6) to the branch manager, Cosmos Co-operative Bank Ltd., Branch : Ghatkopar, Mumbai, and called for certain information. However, as stated in the assessment order no reply was received from the bank upto the date of framing of the assessment under Sec. 144 r.w.s 147, dated 10.11.2018. As the notices issued u/ss. 148/142(1) could not be served upon the assessee thus, the A.O, is stated to have effected service of the said notices through affixture at the last known address of the assessee. However, as the assessee despite having been afforded sufficient opportunity failed to put up an appearance in the course of the proceedings before him, the A.O, being of the view that the assessee was not interested in prosecuting the assessment proceedings framed the assessment to the best of his judgment, vide his order passed under Sec. 144 r.w.s 147, dated 10.11.2018 and treated the cash deposits of Rs.16,74,860/- in the assessee‘s saving bank account as his unexplained money under Sec. 69A of the Act.
3. Aggrieved, the assessee assailed the assessment order before the CIT(A). Before the CIT(A) the assessee challenged the validity of the assessment framed by the A.O under Sec. 144 r.w.s 147, dated 10.11.2018 on the ground that no notice under Sec. 148 prior to framing of the impugned assessment was served upon him. Also, it was the claim of the assessee that the subsequent notices stated to have been issued by the A.O were also not received by him. Alternatively, the assessee on merits assailed the addition of Rs.16,74,860/- made by the A.O under Sec.69A. It was the claim of the assessee that cash deposit of Rs.16,50,860/- in his bank account was primarily sourced out of the amounts that were withdrawn from the same bank account during the year in question. As such, it was submitted by the assessee that on merits addition only to the extent of Rs.1,48,460/- was liable to be made in his hands. However, the CIT(A) not finding favour with the contentions advanced by the assessee both as regards the validity of the jurisdiction that was assumed by the A.O for framing the assessment under Sec. 144 r.w.s 147, dated 10.11.2018; as well as the submissions that were advanced by him as regards the merits of the case, dismissed the appeal.
4. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. As the assessee during the pendency of the appeal before us had expired on 22.06.2019 thus, his legal heir i.e Smt. Bharti Pankaj Shah (widow of the deceased assessee) vide a letter dated 23.12.2020 (alongwith affidavit) had sought for being brought on record as 4 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5) the l/heir of the deceased assessee, and had filed a revised memorandum of appeal. The ld. Authorized Representative (for short ‗A.R‘) for the assessee at the very outset of the hearing of the appeal assailed the validity of the assessment framed by the A.O under Sec. 144 r.w.s 147, dated 10.11.2018. It was submitted by the ld. A.R that as the impugned assessment was not preceded by any service on the assessee of a notice issued under Sec. 148 of the Act thus, the assessment therein framed was invalid and void ab-initio. Elaborating on her aforesaid contention, it was submitted by the ld. A.R that the assessee who was a senior citizen (since deceased) was a small time cloth merchant who during his life time was trading in cloth fabric. It was submitted by the ld. A.R that the assessee had way back filed his last income-tax return for A.Y. 2005-06, and thereafter, as his annual income in the subsequent years remained substantially below the basic exemption limit thus, no return of income for the said years was filed by him. It was averred by the ld. A.R that the residential address of the assessee was viz. ―Building No.59, Room No. 1764, Sagar Housing Society, Pant Nagar, Ghatkopar-(W), Mumbai 400075‖ and it was never changed during his life time. It was submitted by the ld. A.R that though the address borne on the notice under Sec. 148 (as gathered from a perusal of the records) was correctly stated however, that mentioned in the assessment order and also the other notices, viz. ―Goswami 1-2 Sapna Apartment, 3rd Floor, LBS Marg, Ghatkopar – (W), Mumbai – 400 086‖ was an incorrect address. It was further stated by the ld. A.R that although it was the claim of the revenue that the notice issued under Sec. 148, dated 21.03.2018 was uploaded electronically on the portal of income-tax, however, the service of the same by the said means was incomprehensible as the assessee did not have any e-mail address. In order to fortify her aforesaid claim the ld. A.R had drawn our attention to the screenshot of the income-tax portal page wherein though the date of issuance of the notice issued under Sec. 148, dated 21.03.2018 was mentioned, but the column referring to the date of service of the said notice was found blank. In order to dispel any doubts, it was submitted by the ld. A.R that as the date of service of notice was auto generated by the ITD system thus, the fact, that column referring to the date of service of the impugned notice in the income-tax portal page was found blank proved to the hilt that notice under Sec. 148, dated 21.03.2018 was not served on the assessee by the department through its Income-tax Business Application (for short ―ITBA‖). In sum and substance, it was the claim of the ld. A.R that de hors service of a notice under Sec. 148 upon the assessee, the assessment framed under Sec. 144 r.w.s 147, dated 5 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5) 10.11.2018 cannot be sustained and was liable to be vacated on the said count itself. It was further submitted by the ld. A.R that though the assessee‘s bank viz. Cosmos Cooperative Bank Ltd., Branch : Ghatkopar had in pursuance to the notice issued by the A.O under Sec. 133(6), dated 11.07.2018, therein vide its reply dated 30.07.2018 furnished the requisite details (including the address of the assessee), however, despite the said fact no attempt was made by the A.O to effect service of the notice under Sec. 148 at the correct address of the assessee. Alternatively, it was submitted by the ld. A.R that as the assessee was a small time cloth merchant and the cash deposits of Rs.16,74,860/- in his bank account during the year in question was sourced from the petty cash sales and redeposit of the cash withdrawals made during the year in question from the very same bank account thus, addition made by the A.O being highly arbitrary was liable to be vacated.
5. Per contra, the ld. Departmental Representative (for short ‗D.R‘) relied on the orders of the lower authorities. It was submitted by the ld. D.R that the notice issued under Sec. 148, dated 21.03.2018 was duly served upon the assessee. Ld. D.R drawing support from a letter dated 21.01.2021 that was received by him from the A.O, had therein claimed that the notice issued under Sec. 148 was served upon the assessee through ITBA on 21.03.2018. It was submitted by the ld. D.R that the assessee had wrongly claimed that no notice under Sec. 148 was served upon him. On merits, it was submitted by the ld. D.R that as the assessee had failed to substantiate the source of the cash deposits in his bank account thus, the A.O, had rightly added the same as his unexplained money within the meaning of Sec.69A of the Act.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. As the assessee has assailed the validity of the assessment, for the reason, that de hors service on the assessee of a notice under Sec. 148 the assessment framed under Sec. 144 r.w.s 147, dated 10.11.2018 cannot be sustained and is liable to be vacated, we shall, thus, first advert to and therein deal with the said issue first. As per Section 148 of the Act, the A.O before making an assessment, reassessment or recomputation under Sec.147, shall serve on the assessee a notice requiring him to furnish within the stipulated time period as may be specified in the notice, a return of his income for the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be 6 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5) prescribed. Admittedly, the very jurisdiction for framing of an assessment or reassessment under Sec.147 of the Act presupposes a valid service on the assessee of a notice issued under Sec.148 of the Act. Before us, it is the claim of the ld. A.R that as prior to framing of the impugned assessment no notice under Sec. 148 was served upon the assessee thus, the assessment framed by the A.O under Sec. 144 r.w.s 147, dated 10.11.2018 cannot be sustained and is liable to be vacated.
Before proceeding any further, we deem it fit to cull out the provisions of Sec. 282 of the Act, which therein contemplates the manner of service of a notice and reads as under:
―282 (1) The service of a notice or summon or requisition or order or any other communication under this Act (hereafter in this section referred to as communication‖) may be made by delivering or transmitting a copy thereof, to the person therein named: - (a) by post or by such courier services as may be approved by the Board; or (b) in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or (d) by any other means of transmission of documents as provided by rules made by the Board in this behalf. (2) The Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub- section (1) may be delivered or transmitted to the person therein named. Explanation - For the purposes of this section, the expressions ―electronic mail‘ and ―electronic mail message‖ shall have the meanings as assigned to them in Explanation to section 66A of the Information Technology Act, 2000 (21 of 2000).‖ Further, Rule 127 of the Income Tax Rules, 1962 contemplates the address (including the address for electronic mail or electronic mail message) to which a notice or summons or requisition or order or any further communication under the Act may be delivered for the purpose of sub-section (1) of Sec. 282, and the same reads as under:
―(Service of notice, summons, requisition, order and other communication.‖ 127, (1) For the purposes of sub-section (1) of section 282, the addresses (including the address for electronic mail or electronic mail message) to which a notice or summons or requisition or order or any other communication under the Act (hereafter in this rule referred to as ―communication‖) may be delivered or transmitted shall be as per sub-rule (2). (2) The addresses referred to in sub-rule (1) shall be 7 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5)
(a) for communications delivered or transmitted in the manner provided in clause (a) or clause (5) of sub-section (1) of section 282— (i) the address available in the PAN database of the addressee; or (ii) the address available in the income-tax return to which the communication relates; or (iii) the address available in the last income-tax return furnished by the addressee; or (iv) in the case of addressee being a company, address of registered office as available on the website of Ministry of Corporate Affairs: Provided that the communication shall not be delivered or transmitted to the address mentioned in items (i) to (iv) where the addressee furnishes in writing any other address for the purposes of communication to the income-tax authority or any person authorised by such authority issuing the communication: [Provided further that where the communication cannot be delivered or transmitted to the address mentioned in items (i) to (iv) or any other address furnished by the addressee as referred to in first proviso, the communication shall be delivered or transmitted to the following address: (i) the address of the assessee as available with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of the said Act); or (ii) the address of the assessee as available with the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898); or (iii) the address of the assessee as available with the insurer as defined in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938); or (iv) the address of the assessee as furnished in Form No. 61 to the Director of Income-tax (Intelligence and Criminal Investigation) or to the Joint Director of Income-tax (intelligence and Criminal Investigation) under sub-rule (1) of rule 114D; or (v) the address of the assessee as furnished in Form No. 61A under sub-rule(1) of rule 114E to the Director of Income-tax (Intelligence and Criminal Investigation) or to the Joint Director of Income-tax (Intelligence and Criminal Investigation); or (vi) the address of the assessee as available in the records of the Government; or (vii) the address of the assessee as available in the records of a local authority as referred to in the Explanation below clause (20) of section 10 of the Act;] , (b) for communications delivered or transmitted electronically:- (i) email address available in the income-tax return furnished by the addressee to which the communication relates; or (ii) the email address available in the last income-tax return furnished by the addressee; or (iii) in the case of addressee being a company, email address of the company as available on the website of Ministry of Corporate Affairs: or (iv) any email address made available by the addressee to the income tax authority or any person authorised by such income-tax authority.
8 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5) (3) The Principal Director General of Income-tax (Systems) or the Director, Gene of Income-tax (Systems) shall specify the procedure, formats and Standard, for ensuring secure transmission of electronic communication and shall also responsible for formulating and implementing appropriate security, and retrieval policies in relation to such communication.]‖ In the backdrop of the mode and manner of service of a notice contemplated in Sec. 282 r.w Rule 127, we shall now test as to whether the Notice issued under Sec. 148, dated 21.03.2018 was validly served upon the assessee prior to framing of the assessment under Sec. 144 r.w.s 147, dated 10.11.2018. As is discernible from the assessment order, we find that it is a matter of fact borne from the record that the notice issued by the A.O under Sec. 148, dated 21.03.2018 and that issued under Sec. 142(1), dated 28.08.2018 were both returned unserved. As observed by us hereinabove, it is stated by the A.O that as the notice under Sec. 148 could not be served upon the assessee thus, the same, was served through affixture at the last known address of the assessee. Rebutting the aforesaid claim of the A.O, it is stated by the ld. A.R that no notice under Sec. 148 was ever served upon the assessee. We have given a thoughtful consideration to the aforesaid counter claims of the authorised representatives for both the parties. As observed by us hereinabove, it is the claim of the assessee that the address mentioned in the assessment order, viz. ―Goswami 1-2 Sapna Apartment, 3rd Floor, LBS Marg, Ghatkopar (W), Mumbai, 400 086‖ was not the correct address of the assessee. The ld. D.R had neither rebutted the aforesaid claim of the counsel for the assessee, nor placed on record any material which would irrefutably prove to the hilt that the notice issued under Sec. 148, dated 21.03.2018 was validly served through affixture at the last known address of the assessee. Rather, in the backdrop of the fact that the address mentioned in the assessment order viz. ―Goswami 1-2 Sapna Apartment, 3rd Floor, LBS Marg, Ghatkopar (W), Mumbai, 400 086‖ is not the correct address of the assessee thus, the aforesaid unsubstantiated claim of the A.O of having effected a valid service of the notice under Sec. 148, dated 21.03.2018 through affixture at the last known address of the assessee does not inspire any confidence and cannot be summarily accepted on the very face of it. We may herein observe that Sec. 282(1)(b) contemplates service of a notice under the Income-tax Act, in a manner, as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purpose of service of summons. As per Order V- Rule 20 of the Code of Civil Procedure (5 of 1908), where the Court is satisfied that for any reason the summons cannot be served in the ordinary way, it shall order the summons to be served by affixing a copy thereof in some conspicuous place in the Court-house, and also upon 9 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5) some conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the court thinks fit. Accordingly, in case substituted mode of service i.e service of notice through affixture is to be resorted by the department then, as per Sec. 282 r.w Order V- Rule 20 of the Code of Civil Procedure (5 of 1908), the copy of the said notice is mandatorily required to be affixed at some conspicuous part of the house in which the assessee is known to have last resided or carried on business or personally worked for gain. However, in the case before us, nothing has been placed on record which would reveal that the A.O had got the notice issued under Sec. 148, dated 21.03.2018 served through affixture at the last known address of the assessee. In fact, as observed by us hereinabove, the fact that the A.O had referred to an incorrect address of the assessee in the body of the assessment order itself militates against the aforesaid unsubstantiated claim of the A.O of having carried out a valid service of the notice issued under Sec. 148, dated 21.03.2018 through affixture at the last known address of the assessee. In the backdrop of the aforesaid facts, we are unable to persuade ourselves to subscribe to the validity of the service by affixture of the notice issued under Sec. 148, dated 21.03.2018, as had been claimed by the A.O in the assessment order.
Insofar the claim of the A.O that the notice issued under Sec. 148 was sent to the assessee through ITBA on 21.03.2018 is concerned, the same is found contrary to the facts borne from the record. Before us, the revenue had relied upon a letter received from the ITO- 27(2)(1), Mumbai, dated 21.01.2021 and therein claimed that the notice issued under Sec. 148 was served on the assessee on 21.03.2018 through ITBA. However, on a perusal of the screenshot of the income-tax portal of the assessee as had been placed on our record at Page 16 of the assessee‘s Paper Book (for short ‗APB‘), we find that the same though reveals that the notice under Sec. 148 was issued on 21.03.2018 [document ID No. ITBA/AST/S/148/2017- 18/1009359143(1)] however, the column referring to the date of service of the said notice is found to be blank. In fact, we are unable to comprehend that when the assessee, as claimed, did not have any e-mail address then, how the notice issued under Sec. 148 could have been served upon him by the department through electronic mode. Nothing has been brought on our record by the ld. D.R to dislodge the aforesaid claim of the assessee. Apart from that, as per the second proviso to Rule 127, a notice could be delivered or transmitted by the A.O at an e- 10 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5) mail address gathered by him from three sources, viz. (i). e-mail address available in the income-tax return furnished by the addressee to which the communication relates; (ii). the e- mail address available in the last income-tax return furnished by the addressee; or (iii). any e- mail address made available by the addressee to the income tax authority or any person authorised by such income-tax authority. Now, in the case before us as the assessee had not filed his return of income for the year in question i.e A.Y 2011-12 thus, the occasion of furnishing of any e-mail address in such non-existent return of income doe not arise. Insofar the last income-tax return of the assessee is concerned, the same, as observed by us hereinabove was filed by the assessee for A.Y 2005-06 on 29.08.2005 (copy on record). On a perusal of the return of income for A.Y 2005-06, we find that no e-mail address was therein made available by the assessee. Lastly, it is also not the case of the department that the assessee had ever made available its e-mail address either to the income-tax authority or to any person authorised by it. In the backdrop of the aforesaid facts, we concur with the ld. A.R that the claim of the revenue that the notice issued under Sec. 148, dated 21.03.2018 was served upon the assessee by electronic mode being devoid of any force cannot be accepted. Accordingly, on the basis of our aforesaid deliberations, we are of a strong conviction that the notice issued under Sec.148, dated 21.03.2018 had also not been served by the department by electronic mode.
As observed by us hereinabove, the assessee who had filed his last income-tax return for A.Y. 2005-06 had therein in his said return clearly stated his address viz. ―Bldg 59, R. No. 1764, Sangam Housing Society Pant Nagar, Ghatkopar, Mumbai - 400075‖. In the backdrop of the aforesaid fact, the A.O as per Sec. 282 r.w Rule 127(2)(a)(iii) of the Income Tax Rules, 1962 was obligated to have served the notice under Sec. 148 at the aforesaid residential address of the assessee that was duly available with him. Apart from that, as per Sec. 282 r.w Rule 127(2)(a)(i) the A.O could have validly served the notice issued under Sec. 148, dated 21.03.2018 at the aforesaid address of the assessee that was also available in his PAN database. Further, on a perusal of the details furnished by the assessee before us, we find that pursuant to the notice issued by the A.O under Sec. 133(6), dated 11.07.2018 to the assessee‘s bank viz. Cosmos Cooperative Bank Ltd, Branch: Ghatkopar (W), Mumbai, the latter vide its letter dated 30.07.2018 had furnished with him the complete details of the assessee, viz. copy of the account opening form; copy of the KYC documents, PAN Card, of 11 Mr. Pankaj Shantilal Shah Vs. ITO-27(2)(5) the assessee; copy of KYC documents, PAN Card and Passport of Mrs. Pankaj Bharti Shah (widow of the assessee); and the contact number of the assessee/widow of the assessee. In the backdrop of the aforesaid facts, we are unable to understand that now when the actual address of the assessee was available with the A.O from the aforesaid three sources, viz. (i) last income-tax return of the assessee i.e for A.Y. 2005-06; (ii) PAN database; and (iii) details furnished by the bank; then, what had stopped him from serving the notice issued under Sec. 148 at the said address. On the basis of the aforesaid facts, we are of a strong conviction that as the assessment framed by the A.O under Sec. 144 r.w.s 147, dated 10.11.2018 was not preceded by a service on the assessee of a notice issued under Sec. 148 thus, no valid assessment could have been framed by him. Accordingly, we are of the considered view that de hors service on the assessee of a notice issued under Sec.148 of the Act the assessment framed by the A.O under Sec. 144 r.w.s 147, dated 10.11.2018 cannot be sustained and is liable to be vacated.
As we have quashed the assessment on the ground of invalid assumption of jurisdiction by the A.O thus, we herein refrain from adverting to and therein adjudicating upon the contentions advanced by the ld. A.R as regards the merits of the addition so made by the A.O, which are left open.
Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations.