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Facts
The assessee is an individual who did not file an income tax return for Assessment Year 2011-12. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 and made additions of Rs. 5,87,200 for shares and Rs. 5,00,000 for bonds as unexplained investments.
Held
The Tribunal held that the notice issued under Section 148 of the Income Tax Act, 1961, was not served within the prescribed timeline. Consequently, the assessment order passed under Section 144 was void ab initio and required to be quashed.
Key Issues
Whether the reassessment proceedings initiated by issuing a notice under Section 148 of the Income Tax Act, 1961, were valid when the notice was not served within the prescribed timeline and whether the subsequent assessment order was void ab initio.
Sections Cited
147, 148, 144, 139(1), 271(1)(c), 271F, 142(1), 133(6), 149(1)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 1121/JP/2024
आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ,o Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 1121/JP/2024 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke Ranjit Thakur Income Tax Officer, Vs. Plot No. 182 Achrol Vaya Achrol, Jaipur Ishar Marg, 1st Street P O Achrol Amer, Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFYPT 6322 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. S. L Poddar, Adv. jktLo dh vksj ls@Revenue by: Sh. Gautam Singh Choudhary, JCIT-Sr. DR lquokbZ dh rkjh[k@Date of Hearing : 07/01/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 21/01/2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
The present appeal has been because the assessee is dissatisfied with the order of the Commissioner of Income Tax (Appeals)-1, Gurugram dated 12/08/2024 [ for short ld. CIT(A) ] for assessment year 2011-12. The said order of the ld. CIT(A) arose, as assessee had challenged the order dated 16.11.2018 passed under section 147 of the Income Tax Act [ for short Act ], by ITO, Ward 5(1), Jaipur [ for short AO].
1 Under the facts and circumstances of the case and in law, the order passed by the Learned AO u/s 144 r.w.s. 147 of the Income Tax Act, 1961 is void ab- initio as the notice issued u/s 148 of the Income Tax Act, 1961 has not been served to the assessee.
2 Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in passing the ex-parte order without giving the adequate opportunity of hearing and without serving any notice for hearing to the assessee as appeal was filed manually and PAN of the assessee was not registered on ITBA portal.
3. Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming the addition of Rs. 5,87,200/- on account of alleged unexplained investment for purchase of shares.
4 Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming the addition of Rs. 5,00,000/- on account of alleged unexplained investment for purchase of bonds.
5 The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”
Succinctly, the facts as culled out from the record are that in this case, the assessee made a transaction for shares / commodities for an amount of Rs. 3,79,859/- and investment in purchase of bond / debenture of Rs. 9,92,400/-. The assessee also received contract receipts of Rs. 21,625/-. Since the assessee had not filed a return of income, notice as per provision of section 148 was issued on 28.03.2018 after recording reasons and taking approval from the Pr. CIT-II, Jaipur. assessee through speed post. Even in response to notice u/s 148, the assessee filed no return of income. On change of incumbent, Notice u/s 142(1) questionnaire and its enclosure issued on 26.07.2018 and duly served upon the assessee through speed post. Accordingly, ld. AO proceeded to assess income as per provisions of section 144 of the Act.
While doing so, based on the information, ld. AO made additions for Investment for purchase of shares of Rs. 5,87,200/- and for Investment on purchase of bonds at Rs. 5,00,000/-, and thereby income was determined at Rs. 10,87,000/-.
4. Aggrieved by the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised, the relevant finding of the ld. CIT(A) is reiterated here in below:
“5.0 Decision: - Keeping in view the aforesaid factual and legal position, the appeal filed by the appellant is therefore decided on merits on the basis of documents available on record.
5.1 Ground of Appeal No. 1:-This ground of appeal is general is nature and does not need adjudication.
5.2 Grounds of Appeal No. 2:- This ground of appeal is related to the addition of Rs. 5,87,200 /- on account of unexplained investment for purchase of shares made by the Assessing Officer.
5.3 Grounds of Appeal No. 3:- This ground of appeal is related to the addition of Rs. 5,00,000/- on account of unexplained investment for purchase of bonds made by the Assessing Officer.
5.4 As stated above no written submissions except those mentioned in statement of facts were furnished by the appellant in-spite of repeated opportunities, Ground of appeal no. 2 & 3 are taken together and decided as under.
5.5 The reasons for making the additions by the assessing Officer as per the assessment order are produced below: -
“In this case, the assessee has made shares/commodities transaction of Rs.379859/ investment in purchase of bond/debenture of Rs.9,92,400/- and received contract receipts of Rs.21625/- during the F.Y. 2010-11 but no return of income was filled for the A.Y. 2011- 12, therefore notice u/s 148 was issued on 28.03.2018 after recording reasons and taking approval from the Pr. CIT-II, Jaipur.
The notice u/s 148 was duly served upon the assessee through speed post. In response to notice u/s 148, the assessee filed no return of income. On change of incumbent, Notice u/s 142(1)/questionnaire and its enclosure issued on 26.07.2018 and duly served upon the assessee through speed post. In response to notice u/s 142(1), none attended. Thereafter one more and another opportunity were provided by issuing notice u/s 142(1) vide dated 11.09.2018 fixing the hearing on 17.09.2018 and served through speed post. However no compliance was made. Then final opportunity was provided vide notice u/s 142(1)/show cause dated 26.09.2018 fixing the hearing on 05.10.2018. The notice was duly served through speed post. However the assessee made no compliance.
As the assessee did not comply with the notices issued u/s 148 dated 28.03.2018 and notice u/s 142(1)/show cause notice issued for completion of assessment u/s 144 of the IT, Act, 1961, therefore, I have no alternate but to complete the assessment ex-parte u/s 144 on merits, on the basis of material available on record.
The assessee neither had filed return of income voluntarily u/s 139(1) of the Income-tax Act, 1961 nor in response to notice u/s 148 dated 28.03.2018.
As per the ITS data assessee had made investment for purchase of share for Rs. 198000/- dated 27/12/2010, Rs.195200/- date 13/11/2010 and Rs, 194000/-. Assessee did not filed any explanation regarding source of investment for purchase of shares for Rs.587200/- (Rs.198000/- Rs.195200/ Rs. 194000/-). Therefore the same is being added to the total income of the assessee as unexplained investment from, income from other sources.
The penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 is also being initiated separately for furnishing inaccurate particulars of income by the assessee and concealing her income. Addition on a/c of unexplained investment for purchase of shares,
As per the ITS data, assessee had made investment for purchase of bond for Rs. 500000/- da ted 21.02.2011. Assessee did not filed any explanation regarding source of investment for purchase of bond for Rs.500000/-. Therefore the same is being added to the total income of the assessee as unexplained investment from, income from other sources.
The penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 is also being initiated separately for furnishing inaccurate particulars of income by the assessee and concealing her income.
Further, as per provisions of section 139[1] of the I.T. Act, 1961, it was required to assessee to submit his return of income before the end of assessment year. As the assessee did not furnish his return of income before the end of assessment even after having taxable income, therefore penaIty proceedings u/s 271F is also being initiated.
With the above remarks, total income is computed as under:
Total income Rs. Nil
Add: Income from other sources (i) Investment for purchase of shares Rs.587200/-
(ii) Investment for purchase of bonds Rs 500000/-
Total Income Rs. 10,87,000/-
Assessed at total income of Rs. 10,87,000/-. ITNS-150 is enclosed herewith as a part of this order. Consequential, demand notice is issued alongwith this order. Penalty notice u/s 271(1)(b) r.w.s. 274 of the Income-tax Act, 1961 is also being issued with this order, for non-compliance of notices u/s 142(1) dated 26.07.2018. Penalty notice u/s 271(1)(c) and 271F r.w.s. 274 of the Income-tax Act,. 1961 is also being issued with this order.”
5.6 In the appellate proceedings, burden of proof lies on the appellant to prove that the facts and the findings of the AO are incorrect. As stated above no documentary evidence whatsoever regarding the assertions made by appellate in its statement of facts and ground of appeal have been filed during the appell ate proceedings to disprove the finding of the AO and to show as to how the AO is incorrect in law or facts in making addition on this ground. Considering the facts and circumstances of the case no infirmity is observed in the order of the AO.
5.7 Grounds of Appeal No. 4:- This ground of appeal is general in nature and does not need adjudication.
6.0 In the result, the appeal is dismissed.”
Aggrieved by the order of ld. CIT(A), the assessee is before this Appellate Tribunal. To support the various grounds, so raised by the ld. AR of the assessee, he has filed written submissions and the same are reproduced herein below:
“The assesse is an individual. The assessee was not enjoying any taxable income during the year under consideration, hence he has not filed his return of income. The Learned AO has completed the assessment u/s 144 r.w.s. 147 of the Income Tax Act, 1961 on 16.11.2018 without servicing of notice upon to assessee u/s 148 and made the following additions - (i) Addition of Rs. 5,87,200/- on account of alleged unexplained investment for purchase of shares. (ii) Addition of Rs. 5,00,000/- on account of alleged unexplained investment for purchase of bonds. Aggrieved with the order of the Learned AO the assessee preferred appeal before the Learned CIT(A). But the Learned CIT(A) has passed the order ex-parte order without giving the adequate opportunity to the assesse of being heard and confirmed the additions made by the Learned AO. Aggrieved with the order of the Learned CIT(A) the assessee has preferred appeal before your honour. With this background the individual grounds of appeal are taken as under: - Ground No. 1 :- Under the facts and circumstances of the case and in law, the order passed by the Learned AO u/s 144 r.w.s. 147 of the Income Tax Act, 1961 is void ab-initio as the notice issued u/s 148 of the Income Tax Act, 1961 has not been served to the assessee.
In this regard it is submitted the Learned Assessing Officer has passed the ex- parte order u/s u/s 144 r.w.s. 147 of the Income Tax Act, 1961. As the notice issued u/s 148 of the Income Tax Act, 1961 has not been served to the assessee before completion of assessment. In the assessment order the Learned Assessing Officer has mentioned in routine manner that the notice issued u/s 148 was duly served upon the assessee through speed post. These facts are itself established by the letter issued on 11.04.2018 by the Learned Assessing Officer himself. The scanned copy of letter is as under: - Ranjit Thakur In this letter this fact clearly mentioned that the notice issued on 28.03.2014 was not served to the assessee. Hence the order passed by the Learned AO u/s 144 r.w.s. 147 of the Income Tax Act, 1961 is void ab-initio deserves to be quashed. The Learned Assessing Officer has wrongly issued notice u/s 148 to the assessee on the basis that that he has made share/commodities transaction of Rs. 3,79,859/-, investment in purchase of bond/debenture of Rs. 9,92,400/- and received contract receipts of Rs. 21,625/- during the F.Y. 2010-11 but not no return of income was filed. In this regard it is submitted that the assessee has made transaction/investment in shares/bond/debenture through proper banking channel. No cash was deposited in the bank account. If the Learned Assessing Officer has made enquiry from bank by issuing notice u/s 133(6) of the Income Tax Act, 1961 the same facts came into the knowledge of the Learned Assessing Officer. But the Learned Assessing Officer has not made any enquiry and made the additions in a mechanical manner. Hence the order passed by the Learned AO u/s 144 r.w.s. 147 of the Income Tax Act, 1961 is void ab-initio deserves to be quashed. Ground No. 2 :- Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in passing the ex-parte order without giving the adequate opportunity of hearing and without serving any notice for hearing to the assessee as appeal was filed manually and PAN of the assessee was not registered on ITBA portal. In this regard it is submitted that as the assessee was not having any taxable income. Therefore, he was not filing his return of income. Hence he was not registered on ITBA portal. The appeal before the Learned CIT(A) was filed manually in form no.
Copy of form no. 35 is available on paper book page no. 1 to 3. The Learned CIT(A) has not issued any notice for hearing of appeal to the assessee. The notices were issued on portal only. The assessee has registered himself on ITBA portal on 27/08/2024. Hence the Learned CIT(A) has also passed the order without giving adequate opportunity for hearing of appeal. Ground No. 3 & 4:- Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming the addition of Rs. 5,87,200/- on account of alleged unexplained investment for purchase of shares. Under the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming the addition of Rs. 5,00,000/- on account of alleged unexplained investment for purchase of bonds.
During the year the assessee has purchased RBI Bond 9.95% PA RET on 24.02.2011 for a sum of Rs 5,00,000/-. The payment was directly made by Smt. Renu Agarwal on behalf of the assessee. A copy of confirmation of Smt. Renu Agarwal is also available on paper book page no.
A copy of bank statement reflecting the payment made of Rs. 5,00,000/- on 24.02.2011 cheque no. 19417 is available on paper book page no. 5 to 6. The same RBI Bond was sold by the assessee on 23.03.2011 for a sum of Rs 5,13,611/-. The assessee has earned profit of Rs. 13,611/- only from this transaction. The loan was subsequently repaid by the assesse to Smt. Renu Agarwal on 29.03.2011 by cheque no. 032452. This transaction is also reflected in the bank account of the assessee. A copy of bank account of the assessee jointly with Satish Agarwal and Manoj Kumar is available on paper book page no.
7. Apart from this the small transaction regarding sale of shares of SKS Microfinance Ltd of Rs. 39,520/-, shares of Lovable Lingerie Limited for Rs. 11,988/- which was allotted to the assessee in IPO. The assessee has not earned too much profit in these shares. If we consider entire profit as income of the assessee, even then there is no taxable income of the assessee. Hence, he has not filed any income tax return. Except the above transactions the assessee has not made any transaction of Rs. 5,87,200/- or any other transaction. The transactions were done through proper banking channel. For investing the same the assessee has obtained loans of Rs. 5,00,000/- from Smt. Renu 24.02.2011. The same funds were invested in share transaction and purchase of bond/debenture. Copy of confirmations are available on paper book page no.
4. We are also enclosing herewith copy of ledger account with broker M/s Anand Rathi and Stock Brokers Limited for the period 01.04.2010 to 31.03.2011 where the transactions are reflected. Copy of ledger account along with contract note are available on paper book page no. 8 to 10. Therefore, it is clear from the above facts and circumstances, the addition made by the Learned Assessing Officer is not justified. Your honour is requested to delete the addition made by the Learned Assessing Officer and confirmed by the Learned CIT(A). Ground No. 5 :- The appellant craves leave of this tribunal to add to, alter delete and or amend all or any of the grounds of the appeal.
To support the contention so raised in the written submission reliance was placed on the following evidence / records:
Sr. No. Particular Page no. 1. Copy of form no. 35 1-3 2. Copy of confirmation of Smt. Renu Agarwal 4 3. Copy of bank statement of Smt. Renu Agarwal reflecting the payment 5-6 made 4. Copy of bank account of the assessee jointly with Satish Agarwal and 7 Manoj Kumar 5. Copy of ledger account along with contract note with broker M/s Anand 8-10 Rathi and Stock Brokers Limited
The ld. AR of the assessee, in addition to the above written submission so filed vehemently argued that the lower authorities considered that notice in this case was issued and served u/s 148 of the Act but, in fact from page No. 3 of the written submissions as reiterated hereinabove, it is evident that notice was issued on 11.04.2018. Ld. AO categorically confirmed that notice issued on 28.03.2018 was not served and was returned back by post. Therefore, effectively, there was no service of notice u/s 148 of the Act as per the time line given and thereby making the to be quashed.
Per contra, the ld. DR relied on the orders of lower authorities. At the same time, when controverted with the contents of notice dated 11.04.2018, he preferred to remain silent.
We have heard the rival contentions and perused the material placed on record. Undisputedly, Section 149(1)(b), as it stood prior to the introduction of the amendments by way of Finance Act, 2021 prescribed that no notice under Section 148 shall be issued if four years “but not more than six years” have elapsed from the end of the relevant assessment year.
Thus, the period of six years stood erected as the terminal point, which, when crossed would have rendered the initiation of reassessment impermissible in law. Therefore, the impugned notice when tested on the anvil of the pre-amendment Section 149(1)(b) to be sustained would have to meet the prescription of ‘six years’. Undisputedly, that period in respect of AY 2011-12 came to an end on 31 March 2018. We thus find ourselves unable to sustain the impugned action of reassessment which was commenced pursuant to the notice dated 11.04.2018, because as it is very as per the timeline given in the Act. Based on this observation ground no. 1 raised by the assessee is allowed. Since we have considered the technical ground, other ground no. 2 to 5 raised by the assessee become infructuous.
Resultantly, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 21/01/2025.
Sd/- Sd/- ¼ujsUnz dqekj½ ¼jkBkSM+ deys'k t;UrHkkbZ½ (NARINDER KUMAR) (RATHOD KAMLESH JAYANTBHAI) U;kf;d lnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 21/01/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Ranjit Thakur, Jaipur izR;FkhZ@ The Respondent- Income Tax Officer, Jaipur 2. 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZQkbZy@ Guard File (ITA No. 1121/JP/2024) 6. vkns'kkuqlkj@ By order,
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