Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRILALIET KUMAR & SHRI KRINWANT SAHAY
Both the appeals are being filed by the assessee, feeling aggrieved by the order passed by the ld. Pr. Commissioner of Income Tax, Chandigarh-1 dated 28.03.2024& 23.03.2024 u/s 263 for the Assessment Years: 2014-15& 2015-16.
2. The assessee has raised the common grounds of appeal in & 449/CHD/2024 as under:
& Ors. A.Ys.2018-19& Ors. 2 “1. On the facts & circumstances of the case and in law the PCIT Patiala has erred in initiating proceeding u/s 263 of the income tax Act by wrongly assuming jurisdiction u/s 263, hence the order passed by PCIT u/s 263 of the Income tax Act is bad in law & void ab-initio.
2. That having regard to the facts and circumstances of the case, Ld. Pr. CIT has erred in law and on facts in assuming jurisdiction u/s 263 which is bad in law in rejecting the objection that the assessee cannot challenge the Jurisdictional Validity of the order passed u/s 147 r.w.s 144B dated 26.03.2022 in the proceeding u/s 263 of the IT Act on the basis that explanation 2(a) to Section 203(1) supersede all other legal consideration. no appeal against said order filed and any other statutory instrument or medium not undertaken and no objection raised earlier.
3. That having regard to the facts and circumstances of the case, Ld. Pr. CIT has erred in law and on facts in assuming jurisdiction u/s 263 which is bad in law inter alia for this reason that the reassessment order passed u/s 147 r.w.s 144 r.w.s 1448 dated 26.03.2022 which is sought to be revised u/s 263 itself was invalid inter alia on various grounds as mentioned below and thus proceedings initiated u/s 263 against the invalid reassessment order is clearly bad in law, which were summarily rejected. a) That notice u/s 148 is time barred. b) The reason has been recorded on Incorrect facts as no loan has been received from Sh. Joginder Pal Gupta c) The reasons have been recorded on borrowed satisfaction d) Objection to reason were filed on 01.01.2022 there is no disposal order before assessment order. e) The notice is based on information as per search on 3rd party on 23.12.2019 for which specific provision 153C is applicable and not 148.
4. That The learned PCIT has erred in setting aside the reassessment order passed that notice issued is not as per law as the same is based on that AO failed to verify whether any amount received in bank account from the Shell companies controlled by Sh. Joginder Pal Gupta when the reason recorded was regarding Loan received from Sh. Joginder Pal Gupta only without any detail of bank.
Without prejudice to ground no. 2 above, on the facts and circumstances of the case and in Law, the 14. PCTT has erred in assuming jurisdiction and passing the revisionary order u/s 263 of the Income Tax Act. 1961 & Ors. A.Ys.2018-19& Ors. 3 in spite of the fact that the Ld. AO has made adequate inquiries and verification as required for proceeding u/s 147 of the IT Act and the sand inquiries were as per SOP issued by the CIBDI also and assessment was under faceless scheme. The order passed by the AO is neither erroneous nor prejudicial to the interest of revenue, hence the order of PCIT should be set aside.
6. That the learned PCIT has erred in invoking explanation 2 of section 263 for the first time in the above order. Otherwise also the adequate inquiry/Verifications have been made as required for reassessment u/s 147 of the IT Act. Hence the order of PCIT should be set aside.
7. Without prejudice to above ground of appeal
, that having regard to facts & circumstances of the case. Ld. Pr.CIT has erred in law and on facts in setting aside the impugned reassessment order dated 26.03.2022 and directing for detail enquiries for the amount of Rs. 3,65,00,000/-received in the assessee bank account from the bank, account of shell companies controlled by Sh. Joginder pal Gupta which was not as per the reason recorded for which order was passed u/s 147 hence the directionsfor enquires/verification are beyond the reasons recorded which are not as per law.
8. That the case law which have been cited by the worthy PCTT Chandigarh are not applicable to the facts of the case.
9. The appellant craves leave to add amend alter any of the ground of appeal or to take any additional ground of appeal before the appeal is finally disposed of.”
The brief facts as per the order of the ld. Pr. CIT in para 1 and 2 are as under:
The brief facts of the case are that as per information disseminated on ‘Verification’ module of Insight portal under CRIU/ VRU High Risk cases, statement of Sh. Joginder Pal Gupta was recorded on oath u/s 132(4) of the Act during search and seizure operation on 23.12.2019 and he admitted that he was an entry operator who controlled various shell companies and provided accommodation entries to beneficiaries. The assessee company was also one of the beneficiaries and it had received an amount of Rs. 3,65,00,000/-. Therefore, proceedings u/s 147 of the Act were initiated in this case and in response to this, the & Ors. A.Ys.2018-19& Ors. 4 assessee company filed the return of income on 10.04.2021 by declaring an income of Rs. 5,39,040/-. Subsequently, assessment u/s 147 r.w.s. 144B on 26.03.2022 of the Act was completed by accepting the returned income.
2. On perusal of the assessment record, it has been found that the FAO has not even called for the bank statements of the assessee company in order to verify whether any amount was received in its bank account from the shell companies controlled by Sh. Joginder Pal Gupta. Furthermore, as per the assessee’s reply dated 23.03.2022 filed in response to the notice u/s 142(1) of the Act, it was stated that the balance information would be submitted by 29.03.2022. The FAO, however completed the proceedings on 26.03.2022 without making inquiries to verify the information available with the department. Consequently, a notice u/s 263 was issued to the assessee vide letter ITBA/REV/F/ REV1/2023-24/1060392092(1) dated 01.02.2024 by fixing the hearing on 16.02.2024.
4. The ld. PCIT had issued a show cause notice to the assessee u/s 263(1) of the Act, and in response thereto, the assessee filed a reply to the notice issued by the ld. PCIT and had raised various pleas showing that the notice u/s 263 is not legally valid. In response to the said notice, the assessee had also submitted that the notice u/s 148 was issued by the Assessing Officer on 01.04.2021 and therefore, the notice issued by the Assessing Officer under section 148 was barred by limitation. For the above said purposes, the ld. AR had drawn our attention to para 3 of the ld. CIT(A) decision is as under:
3. In response to the notice supra, the assessee company, vide its submission requested to adjourn the hearing, and accordingly, the was granted so. Thereafter, the assessee company sent its reply by the way of submission. The written submissions of the assessee are reproduced verbatim as follows:- In regard to above notice, it is respectfully submitted that re- assessment order passed u/s 147r.w.s 144B against which the above notice is issued, is bad in law and invalid order. It is submitted that the jurisdiction or legality of the & Ors. A.Ys.2018-19& Ors. 5 original proceedings could be challenged in subsequent collateral proceedings also. Reliance is also placed on the following judgments:- (i) The Hon'ble Chandigarh Bench of the Tribunal in Parveen Kumar Mittal vs. Principal CIT (ITA No. 22/Chd/2021) (ii) M/s Westlife Development Ltd., (iii) Vision Promoters & Builders (P) Ltd. Vs. CIT, ITA 401/Chd/2012 dated 28.9.2017 (iv) Supersonic Technologies Private Limited, ITA 2269/Del/2017 dated 10.12.2018." 197 TTJ (Del) 889: (2019) 175 DTR (Del) (Trib) 30-Ed.) (2019) 69 ITR (Trib) 585 (Del). (v) M/S Suraj Pulses Processors..vs Pr. Cit-8, New Delhi on 6 July, 2021 The said reassessment order passed was illegal and invalid due to following:- 1. Notice u/s 148 issued on 01.04.2021 is time barred for the above Assessment Year. Regarding the date of issue of notice, there is no date mentioned on ITBA portal when the notice was uploaded and column is left blank. The snapshot is as under:
It is relevant to mention here that all other notices were uploaded with date. As per the mail received on the registered mail id the dt. 01.04.2021 as depicted below:
& Ors. A.Ys.2018-19& Ors. 6 Hence the notice were issued on 01.04.2021, which is time barred. Regarding date of issue, Reliance is placed on following judgments. (All-HC) 2022 ITL 734: (2022) 444 ITR 41: (2022) 325 CTR 659: (2022) 212 DTR 1: (2022) 286 ΤΑΧΜΑΝ 623 Daujee Abhushan Bhandar (P) Ltd. v. UOI & Ors. IN THE ALLAHABAD HIGH COURT "Thus, considering the provisions of section 282 and 282-A of the Act, 1961 and the provisions of section 13 of the Act, 2000 and meaning of the word 'issue' we find that firstly notice shall be signed by the assessing authority and then it has to be issued either in paper form or be communicated in electronic form by delivering or transmitting the copy thereof to the person therein named by modes provided in section 282 which includes transmitting in the form of electronic record. Section 13(1) of the Act, 2000 provides that unless otherwise agreed, the dispatch of an electronic record occurs when it enters into computer resources outside the control of the originator. Thus, the point of time when a digitally signed notice in the form of electronic record is entered in computer resources outside the control of the originator i.e. the assessing authority that shall the date and time of issuance of notice under section 148 read with Section 149 of the Act, 1961. In view of the discussion made above, we hold that mere digitally signing the notice is not the issuance of notice. Since the impugned notice under section 148 of the Act, 1961 was issued to the petitioner on 6-4-2021 through e-mail, therefore, we hold that the impugned notice under section 148 of the Act, 1961 is time barred. Consequently, the impugned notice is quashed." (Del-HC) 2022 ITL 3073: (2022) 328 CTR 1001: (2022) 218 DTR 327: (2022) 449 ITR 517: (2023) 290 Taxman 493 Suman Jeet Agarwala Ors. v. ITO & Ors. A.Ys.2018-19& Ors. 7 IN THE DELHI HIGH COURT "26.
We also take judicial notice of the fact that the Department from May, 2022, for Notices issued on or after 1-4-2021, has considered the date and time of dispatch of the notices as recorded by the ITBA portal as the date of issuance and disregarded the date of generation of notice i.e. 31-3- 2021. For notices dispatched on or after 1-4-2021, the Department, following the Supreme Court's order in Ashish Agarwal (supra) considered the notices as issued under section 148A of the Act of 1961. This shows that the Department itself acknowledges and admits that the date of generation is distinct from date of issuance and the Department considers the dispatch by ITBA Portal as the date of issue for the purpose of section 149 of the Act of 1961. Category C: is in respect of writ petitions where Notice is dated 31-3-2021 or before, digitally signed on or before 31-3-2021, however sent and received on or after 1-4- 2021. Finding for Notices falling under category C Since the time taken by the ITBA email software system in triggering the e- mails is attributable to the Department, the assessing officer is directed to determine the date and time on which the emails were triggered by the ITBA system server as per the ITBA records and consider the same as the date of issuance." We refer to section 149 of the IT act for time limit for the issue of notice. Time limit for notice. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of (i) an asset; (ii) Expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, Which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:) Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if [a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021:
& Ors. A.Ys.2018-19& Ors. 8 The above notice is time barred in view of the proviso to section 149 of the IT act, a notice which cannot be issued at the time of issue, as per the old provision of section 148 cannot be issued under the new provision. Hence the same is time barred. Without prejudice, many High Courts have held that all notices issued after 31.03.2021 has to follow new procedure for issue of notices under section 148, subject to limitation under section 149. The said decision has been upheld by Honorable Supreme Court in the case of UNION OF INDIA & ORS. v. ASHISH AGARWAL 444 ITR 1 as per the following para 7. "Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a specific aim and object to protect the rights and interest of the assessee as well as and the same being in public interest, the respective High Courts have rightly held that the benefit of new provisions shall be made available even in respect of the proceedings relating to past assessment years, provided s. 148 notice has been issued on or after 1st April, 2021. We are in complete agreement with the view taken by the various High Courts in holding so." The direction given are not applicable in this case as assessment order has already passed complete. In view of the above the notice issued is time barred the assessment framed on that basis is void. However the Ld. PCIT after recording the objection of the assessee had dismissed this objection vide his findings given at page 23 to 24 as under:
The reply (alongside the annexures) filed through its ARs (signed by the authorised signatory of the assessee) has carefully been considered with reference to the facts of the case from the relevant assessment records. The matter pertains to an order passed by the then AO u/s 147 r.w.s. 144B of the Act passed by the AO without examining the submissions made by the assessee on 29.03.2022. In consequence, the aforesaid order passed prematurely and in a hasty manner by the Assessing Officer on 26.03.2022 suffers from violation of law as provided in Explanation 2(a) to Section 263(1) of the Act that enquires as mandated under the law were not carried out by the Assessing Officer in such manners as they “ought to have been carried out”. In consequence, the enquiries into bank accounts and books ofaccounts of the assessee company and as well as its books of accounts need to be carried out fully and comprehensively to examine whether any amounts have been received/credited therein from the bank accounts of the shell companies controlled by Sh. Joginder Pal Gupta. These are directed to be carried out by the AO, failing which the earlier passed u/s 147 r.w.s. 144B of the Act would be held to be erroneous and prejudicial to & Ors. A.Ys.2018-19& Ors. 9 the interests of Revenue as also provided in Explanation 2(a) to Section 263(1) of the Act. The arguments and position taken by the assessee that no loans or amounts of any nature have been received or stands credited in the name of Sh. Joginder Pal Gupta or any of his associate persons or group entities are an important material consideration that needs to be examined and verified by the Assessing Officer at the very inception of the consequential actions directed to be carried out through this order of revision u/s 263 of the Act. The other legal positions stated as applicable by the assessee including the arriving at, the satisfaction and/or reason to believe, by the Assessing Officer, in proceedings and passing of order u/s 147 of the Act, the resultant alleged non-maintainability of revision action u/s 263 of the Act, as also ostensibly supported by the several judicial ratios of the Hon’ble Courts and Tribunals, are discounted and disregarded since; (a). Explanation 2(a) to Section 263(1) of the act which is applicable here is an expressly legislated statutory provision which holds that if inquiries/examinations in the manners in which they ought to have been carried out have not been so carried out, such impugned order of assessment would be held to be erroneous and adverse/prejudicial to the interests of revenue. This would therefore supersede all other legal considerations. (b). The decisions of the Hon’ble Courts and Tribunals that have been cited by the assessee are parimateria distinguishable from the facts of the instant case including on the matter of invocation of Explanation 2(a) to Section 263(1) of the Act. (c). The decisions of the ITAT Benches in the cases of other assessees are orders in personam and not order in rem and are therefore not applicable. (d). The decisions of the non-jurisdictional High Courts are only indicative and not directly binding on the facts of the instant case of the assessee in reference. (e). The assessee has only alleged that the impugned order of assessment passed u/s 147 r.w.s. 144B was invalid and bad in law and “could be” challenged in respect of jurisdiction or legality in subsequent collateral proceedings also. The assessee has not brought on & Ors. A.Ys.2018-19& Ors. 10 record till date any fact which shows that it has indeed challenged the validity, jurisdiction or legality of the issue of the notice u/s 148 of the Act, or the order passed u/s 147 r.w.s. 144B of the Act in appeal or through any other statutory instrument or medium. This means that the assessee’s position in the matter is disingenuous, mendacious and inconsistent in that it seeks to unlawfully buy a non-existent future insurance in the nature of a threat to challenge to the validity of the underlying (original) proceedings, to undercut the legality of the instant revision proceedings u/s 263 of the Act. This self-serving position of the assessee stands exposed forits a priori unacceptability per the accepted principles of law and statute, and is rejected without prejudice to the veracity of the factual matrix applicable in this case. In sum, there is presently no proven unlawfulness in the notice issued u/s 148 of the Act, on the ground of its issue being statutorily barred in time or for other reasons, nor is there any evidence placed on record, other than vague prognoses and unfounded threats catapulted back from the future, about the supposed invalidity and illegality of the proceedings or order passed u/s 147 r.w.s. 144B of the Act. These arguments are rejected as inapplicable and exercises in superfluous verbosity sans any foundation at this time. 5. feeling aggrieved by the order passed by the Ld. PCIT the assessee is in appeal before us for the grounds mentioned hereinabove.
The contention of the assessee before us, that the notice issued under section 148 was barred by limitation provided for and therefore the revisional jurisdiction exercised by the Ld. PCIT against the nonest order is not maintainable.
The Tribunal vide direction dt. 07/01/2025 had directed the parties to file the report alongwith the annexure mentioning therein as to when the notice was & Ors. A.Ys.2018-19& Ors. 11 generated by the Assessing Officer and as to when it was out from the possession / control of the Assessing Officer. It is relevant to reproduce the order sheet of the Bench dt. 07/01/2025 wherein it was directed as under:
The present appeal is directed at the instance of assessee against the order of the Id. CIT dated 28.03.2024 passed under Section 263 in assessment year 2014-15.
At the very outset, Id. Counsel for the assessee has submitted that assessee has filed its return of income on 05.09.2014 declaring total income of Rs.5.39.040/ The Department had carried out a search upon one Shri Joginder Pal Gupta and his statement under Section 132(4) was recorded. Shri Joginder Pal Gupta has declared in his statement under Section 132(4) that he was engaged in providing accommodation entries. According to the AO, assessee is one of the beneficiaries of accommodation entries to the extent of Rs.3.65.00.000/Therefore, reasons were recorded to reopen the assessment of the assessee. The Id. Counsel for the assessee has pointed out that alleged notice under Section 148 was issued on 31.03.2021 but it is nowhere discernible whether this notice was issued for service before 12 o'clock P.M. of 31.03.2021. In other words, the notice should have been away from the control of the AO for service upon the assessee. It is pertinent to note that AO has not made any addition of the item for which assessment was reopened. Therefore, the id. CIT found that this order is erroneous and prejudicial to the interests of Revenue. He invoked his revisional powers under Section 263. The assessee contended that since notice under Section 148 was not within time limit, therefore, assessment order in itself is not valid and if it is not valid, then no action under Section 263 can be taken.
3. The Id. CIT was of the view that this plea cannot be taken in the present proceedings. In our opinion, it is an erroneous approach at the end of the Id. CIT. therefore, factum of service of notice deserves to be established and if it is not issued before 12 o'clock of 31.03.2021, then assessment will be invalid. Consequently, notice under Section 263 will be invalid. Therefore, we are of the view that it is necessary to find out whether notice under Section 148 was issued on 31.03.2021 before 12 o'clock in the night or not. The Id. CIT-DR pointed out that assessee should be directed to download the copy of that notice and place it before the Bench for appreciation. It was submitted that once a notice is being generated on the Portal it will left the Portal towards the assessee and evidence of issuance of notice will be available. Our basic aim is to find out whether notice was issued within the time limit or not. Therefore, we direct both the sides to place every details in their possession so that we can resolve this dispute. The AO is directed to file a report alongwith annexure when notice left his control and assessee is also directed to download copy of that notice and place it on the record. Copy of this order sheet be & Ors. A.Ys.2018-19& Ors. 12 supplied to both the parties for compliance. Hearing is adjourned to 19.03.2025.
The Ld. AR has also filed a communication dated 30.01.2025, wherein it was submitted that, as per the records available on the ITBA Portal, the notice under Section 148 was uploaded on 01.04.2021. It was further submitted that the said notice was generated on 31.03.2021. In support of this submission, the learned AR filed a copy of the notice issued under Section 148, which bears a digital signature dated 31.03.2021. Additionally, the assessee also furnished a copy of the RTI reply received from the Assessing Officer, clearly indicating the date and time at which the email containing the notice was sent. The relevant documents have been scanned and placed on record as under:
(i) Screen shot of ITBA Portal where notice u/s 148 uploaded & Ors. A.Ys.2018-19& Ors. 13 (ii) Copy of Notice u/s 148 enclosed with above.
(iii) Reply of AO including the request made under RTI & Ors. A.Ys.2018-19& Ors. 14 & Ors. A.Ys.2018-19& Ors. 15 (iv) Copy of Annexure-A and Annexure-B attached with above reply by AO & Ors. A.Ys.2018-19& Ors. 16 (v) Annexure-B shows sent time stamp 01.04.2021 12:48:03 AM & Ors. A.Ys.2018-19& Ors. 17
In compliance with the direction of the Bench, the Assessing Officer vide communication dt. 17/03/2025 has filed the following reply alongwith the Annexures before us:
& Ors. A.Ys.2018-19& Ors. 18 & Ors. A.Ys.2018-19& Ors. 19 & Ors. A.Ys.2018-19& Ors. 20 & Ors. A.Ys.2018-19& Ors. 21 & Ors. A.Ys.2018-19& Ors. 22
The learned Authorised Representative (AR) submitted that the last date for issuance of notice under Section 148 for the Assessment Year 2014–15 was 31.03.2021. Since the notice was in fact issued by the Assessing Officer on 01.04.2021, i.e., beyond the prescribed period of limitation, the said notice is invalid, and consequently, the assessment order passed pursuant to it is nonest in the eyes of law.
In support of this contention, the learned AR placed reliance on the following judicial pronouncements:
Hon'ble Chandigarh Bench of the Tribunal in Parveen Kumar Mittal vs. Principal CIT (ITA No. 22/Chd/2021) Daujee Abhushan Bhandar (P) Ltd. v. UOI & Ors. 444 ITR 41 Gagandeep Singh vs Deputy Commissioner Of Income Tax ... Deputy Commissioner of Income Tax 86 ORS. V. Gagandeep Singh ( Supreme Court) 2024 ITL212 Suman Jeet Agarwal & Ors. v. ITO (Del-HC) 449 ITR 517 MICROSOFT CORPORATION (INDIA) PVT. LTD. VERSUS DCIT, CIRCLE-16 (1) , DELHI (DEL-Trib.) 2024 ITL 687 Fortune metalics limited Vs DCIT Hon'ble ITAT Chandigarh Bench ITA 1090/chd/2019 2021 ITL 50 Smt. Simar Kaur V. Assistant Commissioner of Income Tax 212 TTJ 236 Atlas Cycle Industries, 180 ITR 319 M/s Century Fiscal Services LTD V. Income Tax Officer 2020 ITL 3642 (CAL-HC) 2024 ITL 949 : (2024) 298 Taxman 673 PRINCIPAL COMMISSIONER OF INCOME TAX - 5, KOLKATA V. SHRI SANJAY MEHTA & Ors. A.Ys.2018-19& Ors. 23 M/s Prince Polutry Farm, C/o Shri Nitin Bhasin, Advovcate V. The PR. CIT, Panchkula 2023 ITL 4604 11. The learned Departmental Representative (DR) supported the order passed by the learned PCIT and submitted that the assessee did not raise any objection at the time of issuance of notice under Section 148 or at the stage of passing the assessment order by the Assessing Officer pursuant to the reopening dated 31.03.2022. It was contended that the assessee is now raising a technical objection for the first time, which is not tenable in the eyes of law. The learned DR further submitted that the matter ought to be examined on merits in light of the principles laid down by the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT [2018] 402 ITR 640 (SC).
We have heard the rival contention of the parties and perused the material available on the record.
Before adjudicating the issue at hand, it is pertinent to reproduce the relevant statutory provisions of the Income Tax Act, 1961, and the Income Tax Rules, 1962, which govern the issuance and service of notice under Section 148. The provisions relevant for our consideration are Sections 148, 149, and 282 of the Act, along with Rule 127 of the Rules. These are reproduced below for ready reference:
Section 148 – Issue of Notice where Income has & Ors. A.Ys.2018-19& Ors. 24 Escaped Assessment (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish, within such period as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act, for the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; (2) The Assessing Officer shall, before issuing any notice under sub-section (1), conduct such inquiries, as he deems fit, to obtain prior approval of the specified authority. Section 149 – Time Limit for Notice (1) No notice under section 148 shall be issued for the relevant assessment year— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year, only if the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more. Section 282 – Service of Notice Generally (1) The service of a notice or summon or requisition or order or any other communication under this Act may be made by delivering or transmitting a copy thereof to the person named therein— (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; or (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000; or (d) by any other means of transmission, including electronic mail or fax message, as the Board may notify. (2) The Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which such communication may be delivered or transmitted. Rule 127 – Service of Notice, Summons, Requisition, Order, and Other Communication (1) For the purposes of sub-section (2) of section 282, the address of the assessee for communication shall be— (a) the address available in the PAN database of the assessee; or (b) the address available in the return of income furnished by the assessee for the relevant assessment year; or & Ors. A.Ys.2018-19& Ors. 25 (c) the address available in the last income-tax return furnished; or (d) the address available in the records of the Assessing Officer; or (e) the email address available in the electronic filing account registered by the assessee. (2) The communication shall be deemed to have been delivered— (a) if sent by post—at the time at which it would be delivered in the ordinary course of post; (b) if delivered electronically—at the time of sending the electronic record.
14. Upon a conjoint reading of Sections 148, 149, and 282 of the Income Tax Act, 1961, along with Rule 127 of the Income Tax Rules, 1962, it becomes abundantly clear that a communication shall be deemed to be delivered or transmitted electronically at the moment it is sent to the email address provided in the income tax return furnished by the assessee, or to any other email address available with the Income Tax Department.
15. The legislature, for the purpose of service of notice under Section 148, has employed the expressions “delivered” or “transmitted,” and the term “served.” In the present case, although the notice under Section 148 was generated on the CBDT portal on 31st March 2021, the actual service through electronic mode was effectuated only on 1st April 2021. Thus the notice was issued beyond period, hence was not in accordance with law.
16. In our considered view, the issuance of notice beyond the statutory time limit prescribed under Section 149 of the Act, is in direct contravention of the ratio laid down by the Hon’ble Supreme Court in Rajiv Bansal & Ors. A.Ys.2018-19& Ors. 26 (supra), renders the notice invalid and void ab initio. Accordingly, the notice issued under Section 148 is bad in law. Consequently, the assessment order passed by the Assessing Officer pursuant to such a notice is nonest in the eyes of law and cannot be treated as a valid and lawful order.
17. Having held that the notice issued under Section 148 and the consequent assessment order are bad in law, the next question that arises is whether the learned Principal Commissioner of Income Tax (PCIT) could invoke jurisdiction under Section 263 of the Act to revise such a non-existent and invalid order.
18. In our considered opinion, the learned PCIT lacks the jurisdiction to revise an order which is non est. The exercise of powers under Section 263 presupposes the existence of a valid and legally sustainable assessment order. Unless such an order exists, there can be no question of treating it as erroneous or prejudicial to the interest of revenue. For any order to be revised under Section 263, it must first be in existence and recognized in law as such.
19. In the present case, since the assessment order has been held by us to be invalid and non-existent—having been issued and passed in contravention of the law—we do not find any merit in the contention of the learned Departmental Representative (DR) that the learned PCIT was justified in invoking revisional jurisdiction. Once the & Ors. A.Ys.2018-19& Ors. 27 foundation of the assessment itself is held to be void ab initio, the consequential revisional proceedings under Section 263 cannot be sustained in law.
20. Lastly in this regard, we may also refer to the decision of the Coordinate Bench referred by the Ld. AR in case of Parveen Kumar Mittal Vs. The Pr. CIT in dt. 02/11/2021 wherein the coordinate Bench has held as under:-
In the case of M/s Westlife Development Ltd.(supra) the ITAT has, after referring to various case laws held that the legality of the proceedings can be agitated in a subsequent proceeding or even in a collateral proceeding or execution proceeding also. The relevant findings of the ITAT are as under: “7. We have heard both the parties on this issue and also gone through the orders passed by the lower authorities as well as the judgments relied upon before us. In our view, we need to decide following issues, before we go into any other issues or merits of the impugned order: 1. Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263? 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order? In our considered view, since these issues are jurisdictional issues and go to the root of the matter, therefore before dealing with any other issue, we shall first deal with all above three issues one by one, as under: 8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263: The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed & Ors. A.Ys.2018-19& Ors. 28 u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as 'primary proceedings'. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as 'collateral proceedings' in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the 'primary proceedings' can be set up in the 'collateral proceedings' and if yes, then of what nature? 8.1. We have analysed this issue carefully. There is no doubt that after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs.
& Ors. A.Ys.2018-19& Ors. 29 8.2. In a matter that came up before Hon'ble Supreme Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors., [1955] 1 5CR 117 the facts were that the appellant in that case had undervalued the suit at Rs.2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Registry raised the objection as to valuation under Section 11. The value of the appeal was fixed at Rs.9,980. A contention then was raised by the plaintiff in the High Court that on account of the valuation fixed by the High Court the appeal against the decree of the court of the Subordinate Judge did not lie to the District Court, but to the High Court and on that account the decree of the District Court was a nullity. Alternatively, it was contended that it caused prejudice to the appellant. In considering that contention at page 121, a four Judge Bench of Hon'ble Supreme Court speaking through Vankatarama Ayyar, J. held that: "it is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." 8.3. This judgment was subsequently followed by Hon'ble Supreme Court in the landmark case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193, wherein an issue arose whether a decree can be challenged at the stage of execution and whether a decree which remained uncontested operates as res-judicata qua the parties affected by it. Hon'ble apex court, taking support from aforesaid judgment, observed as under: "In the light of this position in law the question for determination is whether the impugned decree of the Civil Court can be assailed by the appellant in execution. It is already held that it is the Controller under the Act that has exclusive jurisdiction to order ejectment of a tenant from a building in the urban area leased out by the landlord. Thereby the Civil Court inherently lacks jurisdiction to entertain the suit and pass a decree of ejectment. Therefore, though the decree was passed and the jurisdiction of the Court was gone into in issue Nos. 4 and 5 at the ex-parte trial, the decree there-under is a nullity, and does not bind the appellant. Therefore, it does not operate as a res judicata. The Courts below have committed grave error of law in holding that the decree in the suit operated as res judicata and the appellant cannot raise the same point once again at the execution." 8.4. Similar view has been taken by Hon'ble Supreme Court by following aforesaid judgments recently in the case of Indian Bank vs Manual Govindji Khona reported in 2015 (3) SCC 712. Further, similar view was emphasized by Hon'ble Bombay High Court (GOA Bench) in & Ors. A.Ys.2018-19& Ors. 30 the case of Mavany Brothers vs CIT (Tax Appeal No 8 of 2007) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution. 8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors, supra were reiterated by the Apex Court in the cases of Superintendent of Taxes vs Onkarmal Nathmal Trust (AIR 1975 SC 2065) and Dasa Muni Reddy v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or reassess a person can never be waived or created by consent. This decision shows that the basic principle recognized in Kiran Singh (supra) is applicable even to revenue statutes such as the Income Tax Act. Dasa Muni Reddy (supra) is a judgment where the principle of 'coram non judice' was applied to rent control law. It was held that neither the rule of estoppel nor the principle of res ludicata can confer the Court jurisdiction where none exists. Here also the principle that was put into operation was that jurisdiction cannot be conferred by consent or agreement where it did not exist, nor can the lack of jurisdiction be waived. 8.6. These judgments were subsequently noticed by Hon'ble Gujarat High Court in the case of P. V. Doshi 113 ITR 22(Gujrat). This case arose under the Income Tax Act with reference to the provisions of Section 147 dealing with re-assessment. The facts were that the assessment was sought to be reopened under Section 147 and notice under section 148 was issued. Validity of reopening was not challenged upto Tribunal and additions were challenged on merits only. The Tribunal restored the matter to the Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction which was given up before the AAC and not agitated further and that in the remand proceedings what was open before the Assessing Officer was only the question whether the addition was justified on merits and the point regarding the jurisdictional aspect was not open before the Assessing Officer. According to the Tribunal, the assessee having raised & Ors. A.Ys.2018-19& Ors. 31 the point in the first round and having given it up could not revive it in the second round of proceedings where the issue was limited to the merits of the additions. In this view, the Tribunal accepted the Revenues plea. The assessee thereafter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was under challenge. According to Hon'ble Gujarat High Court, the rule of res judicata cannot be invoked where the question involved is the competence of the Court to assume jurisdiction, either pecuniary or territorial or over the subject matter of the dispute. Hon'ble High Court further held that since neither consent nor waiver can confer jurisdiction upon the Assessing Officer where it did not exist, no importance could be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against the erroneous assumption of jurisdiction by the assessing authority. According to the Hon'ble Court, the "finality or conclusiveness could only arise in respect of orders which are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction, it would be only a nullity confirmed in further appeals'. In this view of the matter, Hon'ble High Court finally answered the reference in favour of the assessee. 8.7. It is further noted that many of these judgments were discussed and followed by the co-ordinate bench of the Tribunal in the case of Indian Farmers Fertilizers Co-operative Ltd vs KIT 105 lTD 33 (Del), wherein a similar issue had arisen. In this case, the issue raised before the bench was whether it is open to the assessee, not having appealed against the reassessment order, to set up or canvass its correctness in collateral proceedings taken for rectification thereof u/s 154. The bench minutely analysed law in this regard and applying the principle of 'coram non judice' and following aforesaid judgments of the supreme court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order, then the assessee has to step in and protect its interests and the liberty to question even the validity of the reassessment proceedings ought to be given to it......." (emphasis supplied) 8.8. Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri vs ACIT 98 lTD 87 (Del). In the said case, appeal was filed by the assessee before the Tribunal against the levy of penalty. In the appeal challenging the penalty order, the assessee challenged the validity of block assessment order which had & Ors. A.Ys.2018-19& Ors. 32 determined the tax liability of the assessee on the basis of which penalty was levied subsequently. The revenue objected with respect to the ground of the assessee raising jurisdictional issues of assessment proceedings in the appeal against the penalty order. After analysing the legal position, as clarified by Hon'ble Gujrat High Court in the case of P.V. Doshi, supra and Hon'ble Bombay High Court in the case of Jainaravan Babulal vs CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty. 8.9. We also derive support from another judgement of Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate re- assessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in earlier proceedings before the Assessing Officer or in the earlier appeal. 8.10. Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est and we hold accordingly."
Ld. DR was unable to point out any decision holding to the contrary. Therefore the objection of the Ld. DR to the argument of the Ld.Counsel for the assessee challenging the legality of the present proceedings u/s 263 of the Act, by contesting the validity of the original proceedings u/s 147 of the Act, we hold merits no consideration and is dismissed.
Having said so, coming to the facts of the present case before us, the assessee’s argument in support of his contention that the original proceedings in the present case, u/s 147 of the Act, was invalid, is the insufficiency of information leading to the formation of belief of escapement of income, which it is settled law, is an essential prerequisite for reopening the case u/s 147 of the Act.
We have patiently heard at length the arguments of both the parties in this regard and have also carefully perused the contents of the reasons recorded for reopening the case of the assessee placed before us at Paper Book page No.15. We find merit in the contention of Ld.Counsel for the assessee that the reasons recorded do not demonstrate sufficient information in the possession of the AO to lead to the formation of belief of escapement of income. In fact the information available with the AO could not have lead to the formation of belief of escapement of any income at all.
As per the reasons recorded by the AO, the belief of escapement of income is based on the information of cash deposits in the bank account of the assessee remaining unexplained on account of no & Ors. A.Ys.2018-19& Ors. 33 return of income of the assessee available in the system of the department and no explanation regarding the source of the same furnished by the assessee to ITO, Ward-4 (para 7 of the reasons reproduced above).
As it turns out the only valid information in the possession of the AO, while recording reasons for escapement of income, was the fact of cash deposits in the bank account of the assessee amounting to Rs.4.17 crores and no other information. The non availability of return of the assessee in the income tax systems(ITS) has no implications and carries no weight for the formation of opinion that the source of cash deposits has remained unexplained since it does not mean and is not equivalent to the fact of no return having been filed by the assessee. On the contrary, we find, that the fact in the present case is that return was filed by the assessee which fact is noted by the AO also in his reason mentioning the recording of this fact by the ITO, Ward-4. The AO, in truth, was clueless and uncertain of the fact whether return of income was filed by the assessee or not.
Further, even the assessee not responding to inquiries conducted by the AO, NMS, i.e. ITO Ward-4 regarding the cash deposits, we find, is of no relevance for forming opinion of the cash deposits being unexplained, since as rightly pointed out by the Ld.Counsel for the assessee, it is the AO of the assessee whose satisfaction is crucial for reopening and it cannot be a borrowed satisfaction. Also, as pointed out to us by the Ld.Counsel for the assessee and not controverted by the DR, the jurisdiction of the AO, NMS, lay with regard to non-filer assessees only, while the assessee had duly communicated the fact of his having filed his return of income for the impugned year. This fact, we find, stands corroborated by the contents of the reasons itself which note that the ITO, Ward-4, who had jurisdiction in the NMS system, had noted in his sheet that the assessee had filed return for assessment year 2011-12 i.e. the impugned year. Therefore the AO, NMS, had no jurisdiction over the assessee and the assessee was therefore not required to give any explanation regarding the source of cash deposited to him. Therefore the fact of no explanation of the cash deposits being given by the assessee to ITO, Ward 4, was irrelevant for the formation of belief of escapement of income.
What transpires from the above facts therefore is that the AO only had information of cash deposits in the bank account of the assessee, which fact on its own, cannot lead to the belief of escapement of income. What is crucial and important for assuming the jurisdiction to reopen the case of an assessee u/s 147 of the Act is the “belief of the AO of the escapement of income”. The mere fact that the cash is found deposited in the bank account may lead to a suspicion at best but it definitely cannot lead to belief of escapement of income. The cash deposit may be justified by the facts and figures revealed in the income tax return filed by the assessee. In any case there has to be more information in the possession of the AO to form belief that the cash deposits represent assesses own escaped income. In the present case we find that the AO has no categorical information in his & Ors. A.Ys.2018-19& Ors. 34 possession either regarding the fact of return having been filed by the assessee nor any other information to the effect that the source of the cash deposits was unexplained. No inquiries were independently conducted by the AO regarding the source of cash deposits, which would have surely assisted in the formation of belief of escapement of income with regard to the same.
22. The reasons recorded therefore do not justify the assumption of jurisdiction by the AO to reopen the case of the assessee u/s 147 of the Act. The order passed u/s 147 of the Act therefore is clearly not a valid order in the eyes of law.
23. The collateral proceedings on the said order, u/s 263 of the Act, are therefore, we agree, not sustainable in law. The order passed by the Ld.PCIT u/s 263 of the Act is accordingly set aside.
24. Before us arguments were made on the merits of the case also but since we have set aside the order passed by the Ld.PCIT allowing the legal ground raised
by the assessee, the adjudication on merits is merely academic and is therefore not being dealt with by us.
25. The appeal of the assessee is allowed in above terms.
21. We have not referred to the other decisions cited by the learned Authorized Representative (Ld. AR) for the sake of brevity, as they pertain to the same issue. The learned Departmental Representative (Ld. DR) has also not brought to our notice any contrary judgment rendered either by any High Court or by the Hon’ble Supreme Court on the issue at hand. In the absence of any binding precedent to the contrary, we are bound to follow the decision of the coordinate Bench as relied upon by the Ld. AR.
Accordingly, we allowed the appeal of the assessee and struck down the order passed by the ld. PCIT u/s 263 of the Act.
ITA Nos.208/CHD/2021 & Ors. A.Ys.2018-19& Ors. 35 23. The findings and observations as given in is applied in mutatis mutandis.
In the result, both the appeals are filed by the assessee are allowed.
Order pronounced on 16/04/2025.