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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI ANADEE NATH MISSHRA
This appeal is preferred by the department against order dated 23.08.2013 passed by the Ld. CIT (Appeals)-Meerut for assessment year 2006-07. 2. Following grounds of appeal have been raised in this appeal : “1. That the assumption of jurisdiction u/s 147/148 as made by the A.O. and sustained by the C.I.T.(Appeal) is invalid, based on suspicion arbitrary, not sustainable under the law.
2. That without prejudice to the ground no. 1 above the C.I.T.(Appeal) had erred on facts and under the law, in the absence of cogent material, to allow the expenses on adhoc basis @ 20% of the receipt in substitution of estimate made by the AO and consequently the income enhanced to Rs. 15,57,710/- from assessed by AO Rs. 3,23,022/- is arbitrary, unjust and at any rate very excessive.
3. That disallowance of Rs. 1,55,680/- out of the various expenses had made by the AO is arbitrary, unjust and at any rate very excessive.”
The assessee filed return of income on 10.08.2006 showing 3. income of Rs. 1,67,342/-. The case was not selected for scrutiny by the Assessing Officer which is evident from the fact that no notice u/s 143(2) of Income Tax Act was issued by the Assessing Officer, the time limit whereof was available up to 30th September, 2007. However, notice u/s 148 of Income Tax Act read with Section 147 of IT Act was issued on 7th December, 2007. Assessment order u/s 143(3)/148 of Income Tax Act was passed on 12.12.2008 wherein an addition of Rs. 1,55,680/- was made to the returned income and the total income was assessed at Rs. 3,23,022/-. The aforesaid addition of Rs. 1,55,680/- was made by the Assessing Officer taking adverse view of absence of supporting vouchers for expenditure claimed as per profit and loss account. The assessment order has been passed in Hindi, but English translation of the assessment order is available on record. The relevant portion of the translated version of the assessment order is reproduced as under :-
Aggrieved, the assessee filed appeal before the Ld. Commissioner of Incomen Tax (Appeals), Meerut. Vide the impugned appellate order dated 23.08.2013, the Ld. CIT(A) enhanced the total income of the assessee and directed the Assessing Officer to take the total income at the enhanced figure of Rs. 15,57,710/-. The relevant portion of the aforesaid impugned appellate order dated 23.08.2013 of the Ld. CIT(A) is reproduced as under :-
Aggrieved again, the assessee filed the present
appeal before Income Tax Appellate Tribunal (‘ITAT’, for short) against the aforesaid impugned appellate order dated 28.03.2013 of the Ld. CIT(A). During the appellate proceedings in ITAT, a synopsis was filed from the assessee’s side, which is reproduced below for ready reference :-
At the time of hearing before us, the Ld. Counsel for the assessee placed reliance on the aforesaid synopsis. He further submitted that the reasons recorded by the Assessing Officer, if any, for his belief that income has escaped assessment has not been supplied by the Assessing Officer to the assessee. He further drew our attention to paragraph 3.2 of the impugned appellate order dated 28.03.2013 of the Ld. CIT(A) to highlight that the assessment records were not produced by the Assessing Officer even before the Ld. CIT(A) despite the requisition made by the Ld. CIT(A) vide letters dated 26.06.2013 and 01.07.2013. The Ld. Counsel for the assessee submitted that on this basis alone the assessment order dated 22.12.2008 deserves to be annulled, because the Assessing Officer has not established that there were sufficient reasons to assume jurisdiction u/s 147 read with Section 148 of Income Tax Act. The Ld. Counsel further submitted that the assessee had disclosed the entire amount of business receipts totaling Rs. 19,47,136/- in the return of income and had offered income @ 8% of the receipts u/s 44AD of Income Tax Act. When the entire business receipts have already been disclosed, the Ld. Counsel for the assessee contended, it cannot be said that any income had escaped assessment because the assessee had already offered income @ 8% of the receipts applicable for Section 44AD of Income Tax Act.
The Ld. Departmental Representative supported the orders of the Assessing Officer and the Ld. CIT(A). However, in all fairness, the Ld. Departmental Representative admitted that reasons recorded by the Assessing Officer, if any, for coming to the belief that income had escaped assessment, are not available. The Ld. DR also admitted, that apart from the assessment order dated 12.12.2008, which was passed after the assumption of jurisdiction u/s 147 read with section 148 of I.T.Act; there was nothing else which can be produced to support the belief that income had escaped assessment. To a specific query from the Bench as to whether any proceedings were pending before the Assessing Officer at the time when inquiries were conducted by the Assessing Officer prior to issue of notice u/s 148 of Income Tax Act on 07.12.2007 ; Ld. DR further admitted that no proceedings were pending before the Assessing Officer prior to issue of notice dated 07.12.2007 u/s 148 of Income Tax Act.
We have heard both the sides patiently and perused the materials on record carefully. It is not in dispute that reasons recorded by the Assessing Officer for coming to the belief that income had escaped the assessment, was neither supplied by the Assessing Officer to the assessee ; nor the assessment records were produced before the Ld. CIT(A).
The reasons so recorded, if any, have neither been provided to the Ld. CIT(A), nor is there any offer from Revenue’s side to produce the same before the Income Tax Appellate Tribunal. In fact, as mentioned in foregoing paragraph 8 of this order, the reasons recorded by the Assessing Officer, if any, for coming to the belief that income had escaped assessment, are not available. The Ld. Departmental Representative had also admitted at the time of hearing before us, that apart from the assessment order dated 12.12.2008 there was nothing else which can be produced to support the belief arrived at that income had escaped assessment. The validity of assumption of jurisdiction by the Assessing Officer u/s 147 read with Section 148 of Income Tax Act is to be examined on the basis of the reasons recorded by the Assessing Officer for coming to the belief that income had escaped assessment. Such reasons have to be recorded before assumption of Jurisdiction u/s 147 of I.T.Act ( i.e. before issue of notice u/s 148 of I.T.Act). Any developments which take place after assumption of jurisdiction u/s 147 of I.T.Act (i.e. 148 of I.T.Act) has no relevance for deciding whether the AO had reason to believe, before assumption of jurisdiction u/s 147 of I.T.Act ( i.e. before issue of notice u/s 148 of I.T.Act) that income had escaped assessment. When such reasons are not made available by Revenue either to the assessee or to the appellate authorities [Ld. CIT(A) as well as ITAT]; we have to conclude that the onus has not been discharged by Revenue to justify assumption of jurisdiction u/s 147 of I.T.Act through issue of notice under section 148 of Income Tax Act. When the assumption of jurisdiction u/s 147 read with section 148 of I.T.Act lacks validity, the resultant assessment order lacks legitimacy.
On this ground alone, the aforesaid assessment order dated 12.12.2008 deserves to be annulled. However, we further note that the Assessing Officer has not furnished reasons for issue of notice u/s 148 of I.T.Act to the assessee in spite of order of Hon’ble Supreme Court in the case GKN Driveshafts (India) Ltd. vs. ITO (2003) 259 ITR 19 whereby the Assessing Officer is bound to provide reasons recorded by him for issue of notice u/s 148 of I.T.Act to the assessee once the assessee has filed return in response to the notice issued u/s 148 of Income Tax Act.
9.1 Moreover, we have perused second paragraph of the assessment order, which refers to the inquiry made by the Assessing Officer before issue of notice u/s 148 of Income Tax Act on 07.12.2007. The Assessing Officer, in the absence of any proceedings pending before him, has no authority to conduct any inquiry, except when prior permission has been taken by the Assessing Officer for conducting the inquiry u/s 133 of I.T. Act from the competent authority specified in second proviso to Section 133 of I.T.Act. There is nothing on record to show that the Assessing Officer had obtained prior approval of the competent authority specified in second proviso to Section 133 of I.T.Act. to undertake such inquiry. As noted in foregoing paragraph no. 8 of this order, the ld. DR had admitted that no proceedings were pending before the AO prior to issue of notice u/s 148 of I.T.Act.
Thus, we find that the Assessing Officer has conducted inquiries without authority of law before issue of notice u/s 148 of I.T.Act. Thus, the assumption of jurisdiction by the AO u/s 147 of I.T.Act read with section 148 of I.T.Act is based on inquiries conducted without the authority of law.
We are of the firm view that assumption of jurisdiction u/s 147 r.w.s. 148 of I.T.Act on the basis of inquiries conducted without the authority of law lacks legitimacy. Assumption of jurisdiction must be held to be unauthorized, when the inquiries made for assuming the jurisdiction were unauthorized in law; and the assessment order passed in pursuance of unauthorized assumption of jurisdiction u/s 147 r.w.s. 148 of I.T.
Act, also lacks legitimacy. On this ground also, the assessment order dated 22.12.2008 deserves to be annulled. With the annulment of assessment order, grounds 2 and 3 of appeal are merely academic, hence not decided.
In view of the discussion in foregoing paragraphs (9) and (9.1) of this order; we set aside the impugned order dated 23.08.2013 of Ld. CIT(A); and annul the aforesaid assessment order dated 22.12.2008. For statistical purposes, the appeal is allowed.
Order pronounced in the open court on 20/12/2019