BILLO,DELHI vs. ITO, WARD- 1(2), MEERUT

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER Assessment Year: 2010-11 Smt.Billo, Vs. ITO, C/o Kapil Goel, Advocate, Ward-1(2), F-26/124, Sector-7, Meerut. Rohini. PAN: BAKPB9355A (Appellant) (Respondent) Assessee by : Shri Kapil Goel, Advocate Revenue by : Shri D.S. Rawat, Sr.DR Date of Hearing : 11.10.2018 Date of Pronouncement : 12.12.2018 ORDER

This appeal by the assessee is directed against the order dated 19th March, 2018 of the CIT(A), Meerut, relating to Assessment Year 2010-11.

Thereafter, the Assessing Officer provided a number of opportunities, still, there was no compliance. The Assessing Officer, therefore, proceeded to determine the taxable income of the assessee u/s 144 of the IT Act. During the course of assessment proceedings, he noted that there are various cash deposits in the bank accounts and there are also certain withdrawals on different dates. After considering the withdrawals to be explained for the subsequent deposits, the Assessing Officer made an addition of Rs.20,30,415/- u/s 68 of the IT Act.

However, the ld.CIT(A) dismissed both the grounds. So far as the validity of the reassessment proceedings was concerned, basically it was challenged before the CIT(A) regarding non-service of notice u/s 148. However, he observed that notice was duly served by RPAD which was never returned back by the Postal Authorities and another notice u/s 148 was also served on the daughter of the assessee on 29th March, 2017 which is much before the completion of the assessment. There was no protest or letter from the side of the assessee or her counsel with regard to non-service of notice u/s 148. Further, show cause notice u/s 144 was also issued to the assessee.

Under these circumstances, he held that the reassessment proceedings are valid. So far as the merit of the case is concerned, the ld.CIT(A) refused to accept the additional evidence filed before him in absence of proper application for admission of the same under Rule 46A of the IT Act.

4.1 Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:-

Jurisdictional ground challenging validity of the reopening proceedings 1. That orders passed by Ld AO and Ld CIT-A are bad in law being founded on the reasons which are solely based on information of cash deposit in the bank account of the assessee which cannot confer valid jurisdiction u/s 148 of the Act to initiate the reopening proceedings and accordingly notice issued u/s 148 and all subsequent proceedings including orders of Ld AO and Ld CIT-A are void ab initio; 3

2. That orders passed by Ld AO and Ld CIT-A are bad in law as mere AIR information is the basis to reopen the present case u/s 148 of the Act which information cannot be treated as giving rise to valid and adequate reasons to belief that income has escaped assessment within the meaning of section 148 of the Act, accordingly notice issued u/s 148 and all subsequent proceedings including orders of Ld AO and Ld CIT-A are void ab initio; 3. That orders passed by Ld AO and Ld CIT-A are bad in law since notice u/s 148 was admittedly not served on assessee in accordance with law and as stated by CIT-A service was made on assessee’s daughter which itself is seriously disputed, and said purported service cannot give valid jurisdiction to the Ld AO to pass order u/s 144/147, accordingly notice issued u/s 148 and all subsequent proceedings including orders of Ld AO and Ld CIT-A are void ab initio; Merits of the case 4. That Ld CIT-A seriously erred in confirming the arbitrary and unlawful addition of Rs 20,30,415 without appreciating that source of cash deposits is not only fully explained by sale consideration of village agricultural land for which requisite evidence was tendered to first appellate authority where without looking to impeccable evidence addition is confirmed which deserves to be deleted; 5. That Ld CIT-A seriously erred in confirming the arbitrary and unlawful addition of Rs 20,30,415 without appreciating that bank statement of the concerned period has not been objectively appreciated as per law; 5.1 That Ld CIT-A seriously erred in confirming the arbitrary and unlawful addition of Rs 20,30,415 without appreciating that section 68 of the Act cant apply to bank statement etc which makes the addition as bad in law.

Natural Justice serious violation : Makes the assessment a nullity 6. That orders passed by Ld AO and Id CIT-A are bad in law as Ld AO passed the order u/s 144 in strangulation of principles of natural justice (audi altrem partem) which makes the entire proceedings nullity (coram non judice) in eyes of law. 7. That the appellant craves leave to add add/alter any/all grounds of appeal before or at the time of hearing of the appeal.”

5. The ld. counsel for the assessee relied on the following decisions:-

i) Delhi ITAT SMC Bench . in Case . Bhajan Lal Order dated .20-09-2018 ii) Delhi IT AT F Bench, in Case . Pati Ram Vill-Kadipur order dated. 07- 09-2018 iii) Delhi ITAT SMC Bench. in Case. Shri Jagat Singh order dated. 04-09- 2018 iv) Pune ITAT SMC Bench. in Case. Zaheer Abdulhamid Mulani order dated.31-08-2018. v) Delhi ITAT SMC Bench, in Case. Smt .Swati Verma order dated. 01-08- 2018 vi) Bengalure High Court of Karnataka . in Case. M/S Sasken Communication Technologies Ltd order dated .23-07-2018 vii) Bengalure High Court of Karnataka . in Case. M/S Shri. V.Ramaiah order dated. 02-07-2018 viii) Delhi ITAT A Bench, in Case. Smt. Babbal Bhatia order dated. 08-06- 2018 ix) Delhi ITAT SMC Bench, in Case. Shri .Krishan kumar order dated. 15- 12-2017 x) Delhi ITAT SMC Bench . in Case . Shri .Mahavir Parsad order dated. 09- 10-2017 xi) Lucknow ITAT SMC Bench, in Case. Shri Ind a Pal Singh order dated. 18-09-2018.”

5.1 Referring to the above decisions, he submitted that the reassessment proceeding initiated by the Assessing Officer is void ab initio which was made on the basis of AIR information that the assessee has made cash deposits. So far as the merit of the case is concerned, the ld. counsel of the assessee submitted that the deposits made in the bank account of the assessee are out of sale of agricultural land on different dates and, therefore, sale of agricultural land being exempt from tax, no addition could be made.

5.2 The ld. DR, on the other hand, relied on the following decisions and submitted that the reassessment proceedings initiated by the Assessing Officer and upheld by the CIT(A) are perfectly valid as per law. The assessee is a non-filer of income-tax return and when information was received by the Assessing Officer from the CIB that there were huge cash deposits and the assessee did not reply to the query raised by the Assessing Officer regarding the source of such deposit, there was no other option but to initiate proceedings u/s 148 of the IT Act:-

“PCIT Vs Paramount Communication (P.) Ltd. (2017-TIQL-253-SC-IT) 1. where Hon’ble Supreme Court dismissed SLP of assessee. Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings.

PCIT Vs Paramount Communication (P.) Ltd. T20171 79 taxmann.com 409 (Delhi)/r2017l 392 ITR 444 (Delhi) where Hon’ble Delhi High Court held that Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings

Aradhna Estate (P.) Ltd.Vs PCIT [2018] 91 taxmann.com 119 2. where Hon’ble Gujarat High Court held that where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transactions were scrutinised by Assessing Officer during original assessment, reassessment could not be held unjustified. Pushpak Bullion (P.) Ltd. Vs DCIT [2017] 85 taxmann.com 84 (Gujarat) 3. where Hon’ble Gujarat High Court held that where investigation wing of department had during course of investigation in case of a third party found that he was indulged in providing accommodation entries and bogus bills, and assessee had made sizeable purchases from him, reopening notice against assessee was justified

Ankit Financial Services Ltd. Vs DCIT [2017] taxmann.com 58 (Gujarat) 4. where Hon’ble Gujarat High Court held that where material recovered in search of another person indicated that assessee had received bogus share applications through accommodation entries, since assessee was beneficiary, initiation of re- opening was justified.

Ankit Agrochem (P.) Ltd. Vs JCIT [2018] 89 taxmann.com 45 (Rajasthan) 6. (Copy enclosed) where Hon’ble Rajasthan High Court held that where DIT informed that assessee- company had received share application money from several entities which were only engaged in business of providing bogus accommodation entries to beneficiary concerns, reassessment on basis of said information was justified.

Mona Mahesh Bhojani Vs ITO (2017-TIQL-345-SC-IT) 7. SLP dismissed against appeal challenging the judgment, whereby the High Court had held that reopening initiated in case of an assessee who had not filed his return, could not be claimed by the assessee to be based on 'change of opinion'. The Assessee had also challenged the action of High Court in holding that when the AO had tangible material at his command to form a bonafide belief that income chargeable to tax had escaped assessment, the writ court would not interfere with the formation of such belief unless it is shown to be wholly perverse.

Indu Lata Ranqwala Vs DCIT [2017] 80 taxmann.com 102(Delhi) [2016] 8. 384 ITR 337 (Delhi) [2016] 286 CTR 474 (Delhi)where Hon’ble Delhi High Court held that where initial return of income is processed under section 143(1), it is not necessary in such a case for Assessing Officer to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment

Krishna Developers And Co Vs DCIT (2018-TIQL-51-SC-IT) 9. where Hon’ble Supreme Court held that reopening on the basis of very same reasons on which the AO initially desired to make additions but had failed, was justified, if the original assessment was declared as invalid as having been completed without service of notice on the assessee within the statutory period.

10 Thakorbhai Maganbhai Patel Vs ITO [2017] 78 taxmann.com 201 (SC)/ [2017] 245 Taxman 333 (SC) where Hon’ble Supreme Court dismissed SLP against High Court's ruling where reopening of assessment u/s 147 was held to be valid despite the AO not passing speaking order against objections filed by the assessee.

Thakorbhai Maganbhai Patel Vs ITO [2017] 79 taxmann.com 409 (Delhi)/[2017] 392 ITR 444 (Delhi) where Hon’ble Delhi High Court held as follows: “It is true that in the communications, the petitioner has requested for supply of documents. However, the petitioner also raised the objections to the Assessing Officer exercising the powers of reassessment. In true spirit if these communications were examined, the Assessing Officer would have realised that the assessee was objecting to the process of reopening. In terms of decision of Supreme Court in case of GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963, the Assessing Officer ought to have disposed of the objections. Ordinarily, we would have insisted on Assessing Officer doing so. However, facts in the present case are somewhat peculiar and no useful purpose would be served in ensuring only cosmetic purpose of completion of formality and then inviting a fresh litigation. Under the circumstances, we have examined the merits of the petitioner's challenge to the reopening also”

Aravali Infrapower Ltd. Vs DCIT (2017-TIOL-42-SC-IT) 12. where Hon’ble Supreme Court confirmed the decision of High Court, whereby it was held that reopening of assessment is justified, when the bank statements as well as the ITR form disclosing returns, raises more questions than satisfying the queries already raised.

Aravali Infrapower Ltd. Vs DCIT [2017] 77 taxmann.com 322 (Delhi)/[2017] 390 ITR 456 (Delhi) where Hon’ble Delhi High Court held that where assessee-company furnished only cheque numbers, but failed to provide bank details of share applicants and it was found that share applicants had meagre income while investing huge sum of Rs. 8 crores, re-opening notice was justified

Raymond Woollen Mills Ltd. v. ITO And Others [236 ITR 34] 14. where Hon’ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage

R.K. Malhotra ITO Vs Kasturbhai Lalbhai [1977] 109 ITR 537 (SC) 15. where Hon’ble Supreme Court held that the intimation which the Income-tax Officer received from the audit department would constitute "information" within the meaning of section 147(b).

ACIT Vs Raiesh Jhaveri Stock Brokers (P.) Ltd [2007] 161Taxman 316 17. (SC)/[2007] 291 ITR 500 (SC)/[2007] 210 CTR 30 (SC) where Hon’ble Supreme Court held that so long as the conditions of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings, even when intimation under section 143(1) has been issued. ADANI EXPORTS v. DCIT[1999] 240 ITR 224 (Guj) was distinguished.

Paramount Intercontinental Pvt Ltd Vs ITO (2017-T1OL-376-HC-DEL-IT) 19. where Hon’ble Delhi High Court held that when assessee himself is unable to satisfactorily explain correctness of the entries made in his books, he cannot challenge the reassessment notice issued u/s 147.

Ajanta Pvt Ltd Vs ACIT (2017-TIOL-126-HC-AHM-IT) 20. where Hon’ble Gujarat High Court held that reopening is justified on the basis that while claiming deduction u/s 80IA, the assessee had not debited any financial charges and administrative expenses to the Windmill Division while computing profits from Windmill Division, thereby failing to disclose true facts necessary for assessment.

Murlibhai Fatandas Sawlani Vs ITO (2016-TIQL-370-HC-AHM-IT) 21. where Hon’ble Gujarat High Court held that it is not open to the assessee to object to the reopening by asking the AO to produce the source from where the AO has gathered the information for forming a belief that income chargeable to tax has escaped assessment. 22.Greenwell Orchard Vs ITO [2017] 82 taxmann.com 461 (Gujarat) where Hon’ble Gujarat High Court held where in a subsequent year assessee could not prove agricultural income by way of sale of teakwood and, thus, disclosed unaccounted income, in view of fact that income for earlier year under consideration was from similar source, reopening of assessment was justified.

Therefore, at this juncture, the assessee cannot take the plea that the deposits are out of sale of agricultural land. He accordingly submitted that the order of the ld.CIT(A) be upheld.

The above information was received from the CIB Kanpur. The Assessing Officer had 10 given due opportunity to the assessee to explain the source, but, there was no compliance for which the Assessing Officer, after recording the reasons and after obtaining due permission from the Pr. CIT, Meerut issued notice u/s 148 of the IT Act.

Under these circumstances, the reassessment proceedings initiated by the Assessing Officer cannot be held as invalid. The various decisions relied on by the ld. counsel for the assessee in the instant case are not applicable since in all those cases either the assessees were regularly filing income-tax returns or the reopening was made on one issue and addition was made on some other issue. Therefore, those decisions are not applicable to the facts of the present case. If the plea of the ld. counsel for the assessee that in case of a non-filer of tax returns, assessments cannot be reopened on the basis of AIR information that assessee has made huge cash deposits in the bank account is accepted, then the provisions of section 147 and 148 in the statute will become redundant. Accordingly, the grounds relating to validity of reassessment proceedings are dismissed.