HUKAM SINGH,REWARI vs. ITO, WARD-1, REWARI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI

BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER

I.T.A. No. 375/Del/2019 Assessment Year: 2007-08 HUKAM SINGH, vs. ITO, WARD-1, REWARI, REWARI S/O SHRI BUDHA, VPO MAHESWARI, PO DHARUHERA, REWARI HARYANA – 123401 (PAN: COWPS6505Q) (ASSESSEE) (RESPONDENT Assessee by : Shri Kapil Goel, Advocate Revenue by : Shri Pradeep Singh Gautam, Sr. DR.

ORDER The Assessee has filed this appeal against the impugned order dated 15.11.2018 passed by the Ld. CIT(A), Rohtak on the following grounds:- “That the appellant humbly reiterates all the facts and grounds of appeal raised before the Ld CIT (Appeals). 2. That the CIT(A) has blindly confirmed the Assessment Order. That the appellant hereby raises the following grounds of appeal from the said order as follows: a. That the Dahruhera (Rewari) situated in District Rewari is not covered by any entry mentioned in the Government of India Gazette dated 6th Jan 1994. b. The CIT(A) has committed a mistake by holding that Agricultural Land sold by the appellant is a capital asset. That neither Village Maheshwari nor Dahruhera (Rewari) has not population exceeding Ten thousands during Year: 1991, 2001. That the Village Maheshwari is outside of Municipal Limit of Dharuhera (Rewari). c. The CIT (A) has committed a mistake by dismissing the appeal even after holding finding of fact that Municipal Committee, Dahruhera (Rewari) did not exist on the date of Gazette notification on 6th Jan 1994 and was created on 12th

May 2007. That, therefore, it is hit by the explanation attached to the Government Gazette notification (supra). The CIT (A) has ignore the explanation mentioned in the Government Gazette Notification. d. That CIT (A) order violates legal pre-condition as to existence of Municipal Committee at Dahruhera during previous year (FY 2006-07). That therefore when the Municipal Committee, Dharuhera was not in existence on book of Statue during Financial Year : 2006-07, then therefore agricultural land sold by the appellant is not a capital asset. 3. The CIT (A) has disallowed deduction claimed under Section 54F in respect of the flat purchased by the appellant. That as per law applicable to assessment year, the appellant is entitled to the claim deduction under Section 54F for two houses. The appellant craves for permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal. Under the circumstances it is prayed that the appeal may be allowed and / or any other relief as Hon'ble Tribunal may think fit. Justice is prayed,”

To support admission of our legal & Jurisdictional ground, we rely on following case laws i. Recent Apex court decision in Singhad Technical Society (order dated 29/08/2017) 397 ITR 344 ii. Hon'ble Delhi high Court decision in case of Fast Booking (D Pvt. Ltd., order dated 02.09.2015 (ITA no. 334/2015) (378 ITR 693) iii. Hon'ble Delhi high. Court decision in case of Silver Line, order dated 04.1l.2015 (ITA no. 578/2015) (383 ITR 455) iv. Hon'ble Punjab and Haryana High Court decision in case of M/s VMT Spinning Co. Ltd., order dated 16.09.2016 (ITA no. 445/2015) (389 ITR 326) v. Hon'ble Guiarat high court in case of Jolly Fantasy World Ltd 373 ITR 530 vi. decision of the Hon'ble Bombay High Court in CIT Vs. Lalit Kumar Bardia (2017) 84 taxmann.com 213 (Bom), decision of the Hon'ble Bombay High Court in CIT Vs. Lalit kumar Bardia (2017) 84 taxmann.com 213 (Bom), 404 ITR 63(Bom.) (HC): wherein it has been held that mere participation in proceedings or acquiescence would not confer jurisdiction. Reliance was placed on the ratio laid down by the Apex Court in Kanwar Singh Saini Vs. High Court of Delhi (2012) 4 SCC 307, wherein it was observed as under:- "18. It is settled position in law that mere participation in proceedings or acquiescence will not confer jurisdiction. The Apex Court in Kanwar Singh Saini (supra) made observations, which are apposite to the issue at hand and which read as under:- "22. There can be no dispute regarding the settled legal proposition that conferment of jurisdiction is a legislative function and it can neither be conferred with the consent of the parties nor by a superior court, and if the court passes rder/decree having no jurisdiction over the matter, it would amount to a nullity as the matter goes to the roots of the cause. Such as issue can be raised at any belated stage of the proceedings including in appeal or execution. The finding of a court or tribunal becomes irrelevant and unenforceable/inexecutable once the forum is found to have no jurisdiction. Acquiescence of a party equally should not be permitted to defeat the legislative animation. The court cannot derive jurisdiction apart from the statute."

HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved Income Tax Appeal No. 67 of 2005 Smt. Prabha Rani Agrawal

From the aforesaid decisions, if follows that (i) a question relating to jurisdiction which goes to the root of the matter can always be raised at any stage, be in appeal or revision, (ii) initiation of proceedings under section 147 of the Act and/or service of notice are all questions relating to assumption of jurisdiction to assess escaped income, (iii) if an issue has not been decided in appeal and the matter has simply been remanded, the same can be raised again notwithstanding with the fact that no further appeal has been preferred, (iv) in the reassessment proceedings, relief in respect of item which was not originally claimed can not be claimed again as the reassessment proceedings are for the benefit of the Revenue and (v) relief can only be claimed in respect of the escaped income. Applying the principles laid down in the aforesaid cases to the facts of the present case, we find that in the first round of proceedings before the Commissioner of Income Tax (Appeals), the appellant had specifically questioned the validity of the proceedings initiated under section 148 of the Act. That issue was not decided by the Commissioner (Appeals) who had remanded the matter for fresh assessment after providing opportunity of hearing. The question relating to the jurisdiction assumed under section 147/148 of the Act goes to the very root of the matter and it can be raised in appeal for the first time. The appellant had raised this question again in appeal and, therefore, it was incumbent upon the Commissioner of Income Tax (Appeals) to adjudicate upon the grounds taken before him. In fact, he had casually observed that the proceedings under section 148 of the Act had been validly initiated but, wrongly applied the principles laid down by the Apex Court in the case of Sun Engineering Works P. Ltd. (supra). "In the case of P. V. Doshi [1978J 113 ITR 22 this High Court in almost identical fact situation held that the conditions prescribed for initiating reassessment proceedings are mandatory and, therefore, there could never be a waiver of a mandatory provision. That jurisdiction could not be conferred on the authority by mere consent, but only on fulfillment on the conditions precedent for the exercise of jurisdiction. If the jurisdiction could not be conferred by consent, there would be no question of waiver, acquiescence or estoppels or the bar of res judicata being attracted because the order in such a case would lack inherent jurisdiction and would be a void order or a nullity. Therefore, in the facts of the present case the Tribunal had wrongly come to the conclusion that the assessee had waived its right to challenge reassessment proceedings before the Commissioner (Appeals), and was thus not entitled

to raise the said challenge before the Tribunal" Our plea that reopening is invalid is supported by recent Delhi ITAT decision in case of Shri Mohd Yameen Munna in ITA 7134/Del/2018 order dated 02.05.2019 (enclosed herewith) apart from following other decisions. i) Bombay high court decision In case of Mohanlal Champala. Jain (31/01/2019) ii) Gujarat high court decision in case of Gunvantbhai Somabhai Patel (06/02/2018) On approval point we wish to place reliance on Delhi bench ITA T recent decision in case of Kashi Ram (ITA 64511De1l2018) order dated 16.04.2019 Held as: After considering the rival submissions and perusing the orders of the lower authorities and materials available on record. I find that the approval was granted by the Pro CIT, Faridabad by noting "approved" shows that the approval was given in a mechanical manner without recording proper satisfaction after due application of mind. The Hon'ble Delhi High Court in the case of Pro CIT Vs N. C. Cables Ltd. (supra) has held that mere appending of the expression "approved" says noting. It is not as if the CIT has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval bv a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be distributed. On basis of above discussion we make a humble prayer for i) admission of our legal and jurisdictional additional ground and ii) allowing our appeal by accepting our additional ground in toto and iii) quash the orders passed by Ld AO and Ld CIT-A. Submitted”

legal/jurisdictional ground is squarely covered by the decision of the ITAT, SMC, Bench, New Delhi dated 21.8.2019 in the case of Gopal Chand Manudhra and Sons; Damyanti Mundhra; Ramdev Mundhra; Shriya Devi Mundhra and Gopal Chand Mundhra vs. ITO, Wards 55(5), New Delhi decided in ITA No. 1375; 1721; 1722; 1523-1524/Del/2019 respectively relevant to assessment year 2011-12 and therefore, he requested that the same ratio may be followed in the present case and appeal of the assessee may be allowed accordingly by quashing the reassessment proceedings. 4. On the contrary, Ld. DR stated that since this additional ground was not taken before the Ld. CIT(A), hence, the same may not be admitted and appeal of the assessee may be dismissed. In support of his contention he also relied upon the comments on the additional grounds of appeal under Rule 11 of ITAT, which read as under:- “Sub: -Furnishing of Comments on Additional Ground of appeal under rule 11 of ITAT in ITA no 375/Dc)120I9 for A.Y. 2007-08 in the case of Sh. Hukum Singh -Reg-

Kindly refer to your office letter no 44 dated 03.06.2019 on the subject cited above.

In this regard, it is submitted that your office seek comments on raising of additional ground of appeal with respect to assumption of jurisdiction u/s 147/148 of the Act in case of Sh. Hukum Singh by the learned AR of the assessee. In this regard, the AR has stated that the reasons recorded in said case are based on vague grounds and the sale proceeds not the capital gain were treated as income escaping assessment. In this regard, it is stated that the AR of the assessee mere emphasized only on the Reasons recorciing format and seeking approval, in which text "Estimated LTCG more than Rs. 1,16,18,750/- was written against point no. 6 (quantum of income, which has escaped income). However, the reasons recorded during the assessment proceedings were attached as separate annexure and in the said annexure it is clearly stated that the assessee has not disclosed its/his/her income from Long Term Capital Gain in amounting to Rs. 1,16,18,750/-. The part of said annexure is enumerated hereunder- 6

"During the assessment proceedings 143(3)/148 in the case of M/s, Ramotar Parkash Hukum Kalu Ram S/o Budha HUF the assessee has submitted an affidavit stating therein that the land was sold by him in individual capacity and not as a HUF. Assessees share in the said sale consideration comes to Rs. 1,16,18,750/-. The query letter in this regard was issued and / he assessee wasas asked to furnish the copy of return of income, PAN, Calculation of Capital Coin on said land. The assessee did not furnish his reply. On enquiries, it is noticed that the hand in question is situated within 5 KM front municipality's limit of Rewari/Dharuhera Municipality. Thus the land sold by the assessee is covered in the definition of Capital Assets in view of the notification issued by the CBDT on 6.1.1994 (F.No. 16H03/87 ITAI dated 06.01. 94)"

I, therefore, have reason LO believe that the assessee has not disclosed its/ his/her income from Long Term Capital Gain amounting to Rs. 1,16,18,750/- and any other income which subsequently comes to the notice of the undersigned has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. Issue notice u/s 148 of the I.T. Act, 1961 for the assessment year 2007-08”

Therefore, being the malafide intention of the AR of the assessee, his/her contention is not acceptable.

Further, the. AR of the assessee has stated that the Ld AO erred in assumption of jurisdiction u/s 147/148 of the Act on basis of invalid and mechanical approval. But it is evident from the reasons format that the Joint Commissioner of Income Tax, Range Rewari had put clearly 'YES' against the column "Whether the Addl. Commissioner of Income Tax is satisfied on the reasons recorded by the ITO that it is a fit case for issue of notice" along with his signature and stamp. Hence, the notion of AR of the assessee regarding legal and jurisdictional additional ground has no force. The comments in the said

case are submitted to your good office for necessary action.”

5.1 I have also perused the page no. 6 placed in Paper Book which is a copy of Form FOR RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S. 147 AND FOR OBTAINING THE APPROVAL OF THE Addl./Joint Commissioner of Income Tax, especially the Column No. 12 wherein, the Ld. Joint Commissioner of Income Tax, Rewari while granting approval for issue of notice u/s. 148 of the Act has only mentioned “Yes”, which establish that the approving authority has given approval to the reopening of assessment in a mechanical manner without due application of mind and therefore, on this account the reassessment is not sustainable in the eyes of law and needs to be quashed. 5.2 I have also perused the decision referred by the Ld. Counsel for the assessee of the ITAT, SMC, Bench, New Delhi dated 21.8.2019 in the case of Gopal Chand Manudhra and Sons; Damyanti Mundhra; Ramdev Mundhra; Shriya Devi Mundhra and Gopal Chand Mundhra vs. ITO, Wards 55(5), New

Delhi decided in ITA No. 1375; 1721; 1722; 1523-1524/Del/2019 respectively relevant to assessment year 2011-12 wherein, the similar and identical legal/ jurisdictional issue has been adjudicated and decided in favour of the assessee. For the sake of convenience, the relevant portion of the findings of the Tribunal are reproduced as under:-

“18. I have considered the rival arguments made by both the sides and perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the case of the assessee was reopened u/s 147 by recording the reasons and after obtaining approval from the JCIT and the PCIT on the basis of the information received from the Investigation Wing of the Department that the assessee is a beneficiary of accommodation entry of bogus long-term capital gain. The reasons so recorded by the Assessing Officer has already been reproduced in the preceding paragraphs and, therefore, the same is not being reproduced here to avoid repetition. However, a perusal of the column No.12 and 13 of the form for recording the reasons for initiating the proceedings u/s 147 and for obtaining the approval of the Addl./Joint CIT, copy of which is placed at page 40 of the paper book, reveals that the JCIT while giving his approval has mentioned as under:-

“Recommended for approval u/s 147 of the Act.”

“Yes. I am satisfied.”

“10. First of all, ld. AR for the assessee company drew our attention towards sanction accorded by the Addl.CIT for reopening of the assessment obtained by moving an application under Right to Information Act, 2005, available on file as Annexure 'A'. Perusal of the sanction accorded by Addl. CIT in the prescribed proforma shows that there is a question no.13 viz. :

"13. Whether the Addl. CIT is satisfied on the reasons recorded under section 147 that it is a fit case for issue of notice under section 148 of the IT Act.

such annexure has not been produced before the Bench for perusal.

were supplied to the AO. This fact has not been taken into consideration by the AO before initiating the proceedings u/s 147/148 of the Act. However, since reopening of assessment in this case is otherwise not sustainable, we are not entering into any merits.

" Section 151, read with section 148 of the Income-tax Act, 1961 - Income escaping assessment - Sanction for issue of notice (Recording of satisfaction) - High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under. section 148, reopening of assessment was invalid - Whether Special Leave Petition filed against impugned order was to be dismissed

- Held, yes [In favour of assessee] Search and Seizure-Procedure for black Assessment- Search was conducted at residential and business premises of Assessee and notice for block assessment u/s. 158-BC was issued- For block period, returns were filed that were processed u/s. 143 (1)- However, notice u/s. 148 was issued by AO, on basis of certain reasons recorded-Assessee objected to same before AO, that was rejected and assessment was completed u/ss. 143(3) and CO No.57/Del/2012 147- CIT(A) found that reason recorded by Joint Commissioner of Income Tax, for according sanction, was merely recording 'I am Satisfied'- Action for sanction was alleged to be without application of mind and to be done in mechanical manner-Held, while according sanction, Joint Commissioner, Income Tax only recorded "Yes, I am satisfied"- Mechanical way of recording satisfaction by Joint Commissioner, that accorded sanction for issuing notice u/s. 147, was clearly unsustainable-On such• consideration, both Appellate authorities interfered into matter- 13

No error was committed warranting reconsideration-As far as explanation to S. 151, brought into force by Finance Act, 2008 was concerned, same only pertained to issuance of notice and not with regard to manner of recording satisfaction-Amended provision did not help Revenue-No question of law involved in matter, that warranted reconsideration-Revenue's Appeals dismissed."

" Reassessment-Issuance of Notice- Sanction for issue of Notice- Assessee had in its return for A Y 2001-02 claimed that sum of Rs. 1 Crore was received towards share application amounts and a further sum of Thirty Five Lakhs was credited to it as an advance towards loan-Original assessment was completed u/s 143(3)-However, pursuant to reassessment notice, which was dropped due to technical reasons, and later notice was issued

and assessments were taken up afresh-After considering submissions of assessee and documents produced in reassessment proceedings, AO added back a sum of Rs.1,35,00,000-CIT(A) held against assessee on legality of reassessment notice but allowed assessee's appeal on merits holding that AO did not conduct appropriate enquiry to conclude that share inclusion and advances received were from bogus entities-Tribunal allowed assessee's appeal on merits- Revenue appealed against appellate order on merits-Assessee's cross appeal was on correctness of reopening of assessment- Tribunal upheld assessee's cross-objections and dismissed Revenue's appeal holding that there was no proper application of mind by concerned sanctioning authority u/s Section 151 as a pre- condition for issuing notice u/s 147/148-Held, Section 151 stipulates that CIT (A), who was competent authority to authorize reassessment notice, had to apply his mind and form opinion- Mere appending of expression 'approved' says nothing-It was not as if CIT (A) had to record elaborate reasons for 15

agreeing with noting put up-At same time, satisfaction had to be recorded of given case which could be reflected in briefest possible manner- In present case, exercise appears to have been ritualistic and formal rather than meaningful, which was rationale for safeguard of approval by higher ranking officer- Revenue's appeal dismissed."

qualified officers they are to evolve legally sustainable standard operating procedure for discharging quasi- judicial function.

"19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments:

(i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be

provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided;

(ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for re- opening the assessment - especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof;

(iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons;

(iv) the exercise of considering the Assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasi- 18

judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed."

“8. I have considered the rival arguments made by both the sides and perused the material available on record. It is an admitted fact that the case of the assessee was reopened by the Assessing Officer after recording reasons and issue of notice u/s 148 as per the provisions of section 147 and 148 of the Act on the basis of the information received from the Investigation Wing that the

assessee is a beneficiary of accommodation entry obtained from Surendra Kumar Jain group of cases towards introduction of share capital of Rs.35 lacs. I find, the assessee has taken a specific ground before the CIT(A) challenging the validity of reassessment proceedings on the ground that approval u/s 151 of the Act of the superior authorities is not in accordance with law. The relevant ground of appeal No.2 taken before the CIT(A) reads as under:-

“2. That under the facts and circumstances, approval u/s 151 of the superior authorities is not accordance with law and otherwise also mechanical and without application of mind, making the re- asstt. Proceedings unsustainable in law.”

that the Pr. CIT while giving approval has simply mentioned as under:-

“Yes. I am satisfied.”

time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. When such exercise appears to have been ritualistic and formal rather than meaningful which is the rationale for the safeguard of an approval by a higher ranking official, the finding of the Tribunal quashing the reassessment proceedings cannot be disturbed.

approving authority. I, therefore, allow ground of appeal No.2 by the assessee challenging the validity of reassessment proceedings. Since the assessee succeeds on this legal ground, the various other grounds raised by the assessee are not being adjudicated being academic in nature.”

proceedings have been quashed. The Hon'ble Delhi High Court recently in the case of South Yarra Holdings vs. ITO, vide Writ Petition No.3398 of 2018, order dated 1st March, 2019, at para 7 of the order has observed as under:- “7. It is a settled position in law that re- opening of an assessment has to be done by an Assessing Officer on his own satisfaction. It is not open to an Assessing Officer issue a reopening notice at the dictate and/or satisfaction of some other authority. Therefore, on receipt of any information which suggests escapement of income, the Assessing Officer must examine the information in the context of the facts of the case and only on satisfaction leading to a reasonable belief that income chargeable to tax has escaped assessment, that re-opening notice is to be issued.”

“19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque

number. This information by itself cannot be said to be tangible material.

only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom.

lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act.”

have to be treated as not in accordance with law and has to be quashed.

decision dated 21.8.2019 in the case of Gopal Chand Manudhra and Sons; Damyanti Mundhra; Ramdev Mundhra; Shriya Devi Mundhra and Gopal Chand Mundhra vs. ITO, Wards 55(5), New Delhi decided in ITA No. 1375; 1721; 1722; 1523-1524/Del/2019 respectively relevant to assessment year 2011-12, the reassessment is hereby quashed and accordingly the additional ground no. 2 is allowed. Since the assessee succeeds on this legal ground challenging the validity of reassessment proceedings, the addition on merit is not being adjudicated being academic in nature. The appeal filed by the assessee is accordingly allowed. 6. In the result, the appeal filed by the assessee stands allowed. Order pronounced on 22/11/2019. Sd/- [H.S. SIDHU] JUDICIAL MEMBER Date 22/11/2019 “SRB” Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order,

Assistant Registrar, ITAT, Delhi Benches