Loading judgment…
Facts
The assessee, engaged in the cattle feed business, made cash deposits of Rs. 31,10,000/- in a bank account during the Assessment Year 2016-17 but did not file an Income Tax Return. The Assessing Officer initiated reassessment proceedings under Section 147/148A, treating the cash deposits as unexplained money under Section 69A, and confirmed the addition, which was subsequently upheld by the CIT(A).
Held
The Tribunal quashed the assessment order, finding that the show-cause notice under Section 148A(b) failed to provide the mandatory minimum seven days for reply, rendering the reassessment proceedings void ab initio. Additionally, the escaped income of Rs. 31,10,000/- was below the Rs. 50 lakhs threshold stipulated in Section 149(1)(b), making the notice under Section 148 invalid.
Key Issues
1. Whether reassessment proceedings are invalid due to non-compliance with the minimum notice period under Section 148A(b) of the Act. 2. Whether the notice under Section 148 is invalid as the income escaping assessment is below the Rs. 50 lakhs threshold as per Section 149(1)(b) of the Act.
Sections Cited
147, 144, 142(1), 69, 148A, 69A, 115BBE, 148, 149(1)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM
Before: SHRI LALIET KUMAR, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No.
I.T.A.No.317/VIZ/2024 Venkata Ramanaiah Kopparapu ITBA/NFAC/S/250/2024-25/1066508864(1) dated 09.07.2024 for the A.Y.2016-17 arising out of order passed under section147 r.w.s. 144 of Income Tax Act, 1961 (in short ‘Act’) dated 13.03.2024.
Briefly stated facts of the case are that, assessee is in the business of 2. purchase and sale of Cattle Feed. Assessee made purchases from Mr.Bheemisetty Vijay Kumar and sold cattle Feed to various farmers. As per the information available with the Ld. Assessing Officer [hereinafter in short “Ld. AO"] that the assessee has made cash deposits amounting to Rs.30,72,500/- and Rs.29,45,500/- in State Bank of Hyderabad, Gunfoundary Branch and State bank of Hyderabad, Sathenpalle Branch, respectively during the impugned assessment year. Since assessee has not filed return of income, notice under section 142(1) of the Act was issued to the assessee on 2.08.2023 and 11.12.2023. In response, assessee furnished reply along with copy of bank statements. Assessee further submitted that he is having only one bank account in State Bank of India, Sattanapalli Branch wherein he has made cash deposits of Rs. 31,10,000/-. Assessee furnished copy of bank statements of the respective account before the Ld. AO. Assessee also provided explanation to the cash deposits as sale proceeds from business as detailed in Para No. 3.4.4 of the order of the Ld. AO. Ld. AO considered that assessee has failed to substantiate the source of income for such cash deposits amounting to Rs.31,10,000/- and proposed to tax the same as unexplained money under Page No. 2
I.T.A.No.317/VIZ/2024 Venkata Ramanaiah Kopparapu section 69 of the Act. The case was reopened by issue of an order under clause (d) of section 148A of the Act and notice under section 148A was issued on 24.03.2023. Considering the submissions made by the assessee, Ld. AO by relying on various judicial precedents stating that the assessee has not produced any documents substantiating the claim and therefore brought to tax an amount of Rs. 31,10,000/- as unexplained money under section 69A r.w.s. 115BBE of the Act.
3. On being aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld. CIT(A). Assessee reiterated the similar submissions made before the Ld. AO. Ld. CIT(A) after considering the facts that the assessee has not produced any documents to substantiate his claim, confirmed the addition made by the Ld.AO and dismissed the appeal of the assessee.
On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: -
1. The show cause notice under section 148A(b) dated 18.02.2023 served on the assessee through post on 22.02.2023 is invalid as the same has not given 7 clear days for compliance, consequently the entire reassessment proceedings are invalid and void ab initio. Further, the information relied on is not provided to the assessee along with the notice which also vitiates the reopening.
The notice under section 148 dated 24.03.2023issued by the Income-tax Officer, Ward-1(1), Guntur is invalid for the reason that the notice has been issued by the Jurisdictional Assessing Officer (JAO) instead of by the National Faceless Assessment Centre as mandated by the e assessment of income escaping assessment scheme.
The reopening is bad in law as the copy of the approval of the specified authority for the order passed under section 148A(d) is not furnished to the assessee till date though the same is mandated by the CBDT guidelines for issue of notices under section 148.
Page No. 3 I.T.A.No.317/VIZ/2024 Venkata Ramanaiah Kopparapu 4. The notice under section 148 issued on24.03.2023 for the assessment year 2016-17 is barred by limitation as per the provisions of section 149(1)(b) {new section inserted by the FinanceAct, 2021, w.e.f. 01.04.2021}.
The Assessing Unit, National FacelessAssessment Centre is not justified in treating Rs.31,10,000/- deposits in bank as unexplained money under section 69A and the CIT(Appeals), National Faceless Appeal Centre is not justified in confirming the same.
All the above grounds of appeal
are mutually exclusive and without prejudice to one another.
7. The appellant craves leave to add to; alter; amend; modify; delete all or any of the above grounds of appeal.”
5. Before we proceed to adjudicate the appeal on merits, we consider it fit to adjudicate the legal grounds raised by the assessee in Ground Nos. 1, 2, 3 &
4. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the show-cause notice vide DIN & Notice No. ITBA/AST/F/148A(SCN)/2022-23/1049895555(1) dated 18.02.2023 was served on the assessee by post on 22.02.2023 and was required to furnish reply on or before 27.02.2023. In this connection, Ld.AR submitted that the minimum requirement of seven days as prescribed under section 148A(b) was not followed and hence the assessment order is deemed to be void abinitio.
6. Further, he also submitted that since the income escaping assessment is below Rs. 50 lakhs no notice under section 148 of the Act shall be issued as per section 149(1)(b) of the Act he therefore pleaded that on this ground also assessment order is deemed to be null and void. Further, Ld.AR submitted that the Ld. AO has not provided the details on the basis on which the notice under section 148 of the Act was issued.
Page No. 4
I.T.A.No.317/VIZ/2024 Venkata Ramanaiah Kopparapu 7. Ld.AR also referred to the order of the Ld. AO passed under section 148A(d) of the Act vide DIN & Notice No. ITBA/AST/F/148A/2022- 23/1051235178(1) dated 24.3.2023 and submitted that the mandatory period of minimum “7 days” was not accorded to the assessee to furnish his reply to the show-cause notice. He therefore pleaded that the order of the Ld. AO is bad in law and therefore void abinitio. Ld.AR in support of his arguments relied on the various case laws as detailed in the case law paper book submitted before us. He also pleaded that since the assessment order is bad in law the issue on merits was not argued.
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] fully relied on the orders of the Revenue Authorities.
We have heard both the sides and perused the material available on record. Ld. AO in the instant case, has issued a show-cause notice dated 18.02.2023 which was served on the assessee by post on 22.02.2023. This fact is not disputed by the Revenue. The show-cause notice required the assessee to furnish the reply on or before 27.02.2023. Section 148A(b) of the Act is reproduced below for ready reference: -
“148A (b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has Page No. 5
I.T.A.No.317/VIZ/2024 Venkata Ramanaiah Kopparapu escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);”
On bare reading of sub clause(b) of the Act, it is very clear that the assessee shall be served with show cause notice requesting him to show cause by providing him not less than “7 days” but not exceeding 30 days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf.
Further, section 149(1)(b) of the Act is reproduced below for reference:-
“149(1)(b) if three years and three months,, but not more than five years and three months, 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 related to any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakhs or more.
It is also clear that no notice under section 148 of the Act shall be issued subject to the conditions specified under section 149(1)(b) of the Act as extracted above which has escaped assessment amounts to or is likely to amount to fifty lakhs or less.
In the instant case addition is made for an amount of Rs. 31,10,000/-. Further the mandatory period for the submission of reply by the assessee to the show-cause notice was also not provided to the assessee. The Hon’ble
Page No. 6
I.T.A.No.317/VIZ/2024 Venkata Ramanaiah Kopparapu High Court of Rajasthan in the case of Bijendra Singh v. PCIT in Civil Writ Petition No. 6852 of 2022 dated 04.01.2024 stated that both the terminal days be excluded for the purpose of complying with the requirement of “not less than 7 days”. Similarly, the Hon’ble High Court of Karnataka in the case of Rangaswamaiah Ravikumara v. ITO & others, in Writ Petn. No. 14654 of 2024 dated 03.07.2024 held that the time afforded in the notice is less than 7 days and hence prejudice is being caused due to non-adherence to the time period under section 148A(b) of the Act. Respectfully following the above decisions, we find that Ld. AO has not complied with the provisions of section 148A(b) of the Act and also section 149(1)(b) of the Act. Therefore, we have no hesitation to quash the Assessment Order which is void abinitio thereby allowing the legal grounds raised by the assessee.
Since the legal ground is adjudicated in favor of the assessee, adjudication of grounds on merits does not arise.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 14th February, 2025.