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Income Tax Appellate Tribunal, DELHI BENCHES “SMC” : DELHI
Before: SHRI BHAVNESH SAINI
Date of Hearing : 18.10.2018 Date of Pronouncement : 05.11.2018 ORDER
This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-7, New Delhi, Dated 19.12.2017, for the A.Y. 2009-2010.
Brief facts of the case are that the return of income was filed by the assessee-company on 27.09.2008 declaring
2 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. loss of Rs.6,890/-. The case was reopened under section 147/148 of the I.T. Act, 1961 and notice under section 148 was issued to the assessee-company on 31.03.2016 with the prior approval of Pr. Commissioner of Income Tax after recording the reasons in which the A.O. has mentioned that a letter Dated 29.03.2016 was received from the Investigation Wing informing that the assessee-company is a beneficiary of bogus accommodation entries received from the companies controlled by Shri Pradeep Kumar Jindal group of companies.
A search and seizure operation was conducted in the case of Shri Pradeep Kumar Jindai group of companies as well as in the case of Shri Sajan Kumar Jain group of cases in which it was pointed-out that as per the list of beneficiaries, assessee - company has received share capital premium/loan. According to A.O. notice under section 148 Dated 31.03.2016 was issued and served upon the assessee-company by speed post and by email giving 30 days to file the return in the prescribed form.
The assessee-company did not file any return. Therefore, further notice Dated 03.08.2016 was issued to the assessee
3 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. requesting to file return of income in response to notice under section 148 of the I.T. Act, 1961. The assessee filed objections to the proceedings initiated under section 148 of the I.T. Act which were disposed off by the A.O. The assessee in the objections contended that the notice under section 148 Dated 31.03.2016 has never been served/received and there is no knowledge of any such notice being issued. It is further submitted that the said notice under section 148 has been addressed at the address as "E-10, Greater Kailash Enclave, Part-II, New Delhi" which did not belongs to the assessee- company for the last many years. Assessee-Company has been filing the returns of income at the correct address i.e at “144, Golf Links, New Delhi”. The A.O. however, noted that the correct address of Greater Kailash belong to Shri C.L. Arora, one of the Directors of the assessee-company and that notice was also served through email on 31.03.2016. Therefore, there is a valid service upon assessee-company. The assessee further submitted objections before A.O. intimating therein that no copy of the email served have been provided to the 4 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. assessee-company and that Shri C.L. Arora resigned from the Directorship w.e.f. 20.02.2012. Hence, notice Dated 31.03.2016 is not at correct address for the purpose of service of notice. The correct address of assessee-company is with the Department. Therefore, there is no service of notice upon assessee-company. The A.O. further noted that as per PAN data base, the address of assessee-company is of the Director at E-10, Greater Kailash Enclave, Part-II, New Delhi.
Therefore, there is a valid service of notice upon assessee - company under section 148 of the I.T. Act. The A.O. also noted that assessee-company has received share capital/share premium of Rs.15 lakhs from M/s. Euphoria Capital Pvt. Ltd. The assessee-company further explained that correct name is M/s. At All Times Yours Securities (P) Ltd. The A.O. was not satisfied with the explanation of assessee-company and made addition of Rs.15 lakhs under section 68 of the I.T. Act, 1961.
The A.O. further added Rs.20,000/- on account of commission paid for getting accommodation entries.
5 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi.
The assessee-company challenged the proceedings under section 148 of the I.T. Act and above additions before the Ld. CIT(A) and same submissions have been reiterated before Ld. CIT(A). The Ld. CIT(A), however, confirmed all the additions as well as confirmation of initiation of proceedings under section 148 of the I.T. Act, 1961.
I have heard the Learned Representatives of both the parties and perused the material available on record.
The assessee-company in the present appeal challenged the validity of proceedings under section 148 of the I.T. Act, addition of Rs.15 lakhs under section 68 of the I.T.
Act and addition of Rs.30,000/- on account of commission.
Learned Counsel for the Assessee reiterated the submissions made before the authorities below and referred to various documents to show there is no valid service of notice under section 148 of the I.T. Act. Therefore, assumption of jurisdiction under section 148 is illegal. PB-1 is notice Dated 03.08.2016 issued by A.O. to the assessee-company for filing
6 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. of the return which is addressed at 144, Golf Link, New Delhi.
PB-2 is notice under section 148 Dated 31.03.2016 issued to assessee-company at E-10, Greater Kailash Enclave, Part-II, New Delhi. PB-3 is objection of the assessee-company regarding service of notice upon the assessee-company. PB-4 is assessment order for A.Y. 2006-2007 in which A.O. given address of assessee-company at 144, Golk Link, New Delhi under section 143(3) Dated 19.11.2008. PB-5 is return of income for assessment year under appeal in which assessee - company has shown correct address at 144, Golf Link, New Delhi. PB-6 is objections disposed of by A.O. Dated 29.08.2016 giving correct address of assessee-company at 144, Golf Link, New Delhi. PB-8 is email at which notice through email have been served. PB-14 is objection of the assessee-company to intimate that A.O. sent email at wrong address i.e., prashanti investments@yahoo.co.in. PB-14 is the letter explaining that correct email address of assessee as per return filed is prashantiinvestments@yahoo.in. PB-12 is intimation to A.O. of resignation of Shri C.L. Arora, Director
7 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. w.e.f. 20.02.2012. Learned Counsel for the Assessee, therefore, submitted that notice under section 148 have not been served upon assessee-company. He has relied upon Judgment of Hon’ble Delhi High Court in the case of Pr. CIT-1 vs. Atlanta Capital Pvt. Ltd., in ITA.No.665 of 2015, Dated 21.09.2015 in which in paras 7 to 14 it was held as under :
“7. On the facts of the present case, it is seen that notice Dated 27th March 2008 under Section 148 of the Act was issued to the Assessee by the Assessing Officer
('AO') at the address at B-231, Okhla Industrial Area,
Phase-I, New Delhi. Admittedly, the Assessee had shifted from that address with effect from 1st February 2005 to a new address at B-115, Sarvodaya Enclave, New Delhi. For AY 2005-06 and the subsequent AYs, the Assessee disclosed his address as B-115, Sarvodaya Enclave, New
Delhi. Even the AO had sent letters to the Assessee at the same address on 8th August 2007. The intimation under Section 143(1) of the Act Dated 25th January 2008 for AY
8 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi.
2006-07 was also sent by the AO to the Assessee at the same changed address i.e. B-115, Sarvodaya Enclave,
New Delhi. There is nothing to show that the notice under Section 148 of the Act was in fact issued by the AO showing the aforementioned changed address.
It is the contention of Mr. N.P. Sahni, learned
Senior Standing counsel for the Revenue, that the notice satisfied the requirement as to limitation under Section 149 (b) of the Act. However, as noted by the ITAT, the notice itself was not issued at the correct address. The fact that the said notice, sent by speed post, was not returned unserved, would be to no avail since the address given in the notice was not the last known address of the Assessee.
9. Mr. Sahni then submitted that it was incumbent
on the Assessee to have got his changed address entered in the PAN Data Base failing which the AO would only go
9 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. by the address given in the record of the relevant AY which in the case is AY 2001-02.
10. The Court is unable to agree with this submission. No provision in the Act has been shown to the Court which obliges the Assessee to ensure that his
changed address is entered in the PAN Data Base failing which he is precluded from insisting on the notice under Section 148 being issued to him at the known address and being served upon him. In the present case, on facts, it is not in dispute that the AO was aware of the change of address of the Assessee and yet the notice under Section 148 of the Act was issued at the older address.
11. Mr. Sahni submitted that the order of the CIT (A)
notes the fact that a photocopy of the notice was given to the Assessee during the re-assessment proceedings and that by itself should constitute sufficient service of notice on the Assessee. In light of the law explained by the Supreme Court in R.K. Upadhyaya v. Shanbhai P. Patel
10 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi.
(1987) 3 SCC 96 which has in turn been followed by this Court in Chetan Gupta (supra), the requirement of both the issuance and the service of such upon the Assessee for the purposes of Section 147 and 148 of the Act are mandatory
'jurisdictional requirements'.
The mere fact that an Assessee participated in the re- assessment proceedings despite not having been issued or served with the notice under Section 148 of the Act in accordance with law will not constitute a waiver of the said jurisdictional requirement.
On facts, therefore, the Court finds no legal error
committed by the ITAT in holding that there was no proper service of notice on the Assessee under Section 148 of the Act.
Consequently, the Court finds that no substantial
question of law arises for determination by the Court.
The appeals are dismissed.”
11 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi.
5.1. He has also relied upon decision of Hon’ble Delhi High Court in the case of CIT vs. Eshaan Holding (P) Ltd., (2012) 344 ITR 541 (Del.) in which it was held that “notice sent to old address and service by affixture at old address is not proper. Consequential assessment is not valid”. Learned Counsel for the Assessee also relied upon decision of Hon’ble Delhi High Court in the case of CIT vs. Chetan Gupta (2015)
126 DTR 401 (Del.) in which it was held that “under section 148 service of notice upon assessee is a jurisdictional requirement and must be mandatorily complied with.” Learned Counsel for the Assessee, therefore, submitted that since no notice under section 148 has been served upon assessee - company through post or through email, therefore, initiation of proceedings under section 148 are illegal and bad in law.
On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that notice was issued as per PAN Data base in which address of Greater Kailash has been mentioned. It is for the assessee-company to get it
12 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. updated. The Ld. D.R. produced the assessment record which shows that original notice under section 148 returned by the postal authorities on 02.04.2016 with the remarks that “no such firm”.
After considering the rival submissions, I am of the view that no notice under section 148 have been served upon the assessee-company. Therefore, entire proceedings are illegal and bad in law. The assessee-company in the return of income for assessment year under appeal has mentioned its address at 144, Golf Link, New Delhi. The same address is mentioned by the A.O. in the assessment order except in the notice under section 148 of the I.T. Act. The A.O. has mentioned the correct address in all the correspondence for assessment year under appeal as well as in preceding assessment years including the assessment order passed under section 143(3) of the I.T. Act.
The assessee-company explained that notice under section 148 have been issued at incorrect address at E-10, Greater Kailash Enclave, Part-II, New Delhi, which does not belong to 13 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. the assessee-company. The A.O. however, stated that it is the address of the Director of the assessee-company Shri C.L.
Arora. The assessee-company explained that he had already resigned from the Directorship in the year 2012. Even thereafter, the A.O. was making correspondence at the correct address of the assessee at 144, Golf Link, New Delhi. The decision of the Hon’ble Delhi High Court in the case of Pr. CIT- 1 vs. Atlanta Capital Pvt. Ltd., in ITA.No.665 of 2015, Dated 21.09.2015 (supra), clearly applicable to the facts of the case and it would show that A.O. was aware of the correct address of the assessee-company and as such, A.O. cannot take address from PAN Data base. The A.O. despite noting correct address of the assessee-company in earlier year, has wrongly issued notice at the wrong address which is proved by the fact that the postal authorities returned the original notice on 02.04.2016 with the remarks “no such firm”. The assessee- company further submitted before A.O. that wrong email address have been used by A.O. for the purpose of sending intimation of issuing notice under section 148. This fact is 14 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. proved by assessee-company because there is a difference in email address shown by the A.O. and given by the assessee- company. There is no denial of such explanation of assessee- company. These facts clearly prove that notice under section 148 Dated 31.03.2016 have not been served upon assessee- company. Therefore, entire proceedings under section 148 are vitiated and are illegal and void abinitio. This ground of appeal of Assessee-Company is allowed.
8. Learned Counsel for the Assessee also referred to PB-22 which is approval of the Pr. CIT for initiation of proceedings under section 148 of the I.T. Act in which in column No.13, the Pr. CIT has mentioned “Yes”. Learned Counsel for the Assessee submitted that approval under section 151 is not in accordance with law and such approval is purely mechanical and without application of mind. He has relied upon decision of Hon’ble Delhi High Court in the case of CIT vs. N.C. Cables Ltd., (2017) 391 ITR 11 (Del.) in which the Hon’ble Delhi High Court held that “Section 151 of the Act
15 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi. clearly stipulated that the Commissioner of Income Tax (Appeals) who was the Competent Authority to authorize the re- assessment notice, had to apply his mind and form an opinion.
Mere appending of the expression “approved” says nothing.
8.1. He has, therefore, pleaded that even approval under section 151 is not valid, therefore, proceedings under sections 147/148 are liable to be quashed.
On the other hand, Ld. D.R. submitted that facts have been considered by the Addl. CIT before granting approval in this case.
After considering the rival submissions, I am of the view that this issue is also covered in favour of the assessee- company by the Judgment of Hon’ble Hon’ble Delhi High Court in the case of CIT vs. N.C. Cables Ltd., (supra). In the present case, Pr. CIT while granting approval for initiation of re-assessment proceedings, merely stated “Yes”, therefore, such approval is not valid in the eye of Law. I, accordingly, set aside the Orders of the authorities below and quash the 16 ITA.No.391/Del./2018 M/s. Prashanti Investment (P) Ltd., New Delhi.
reopening of the assessment on this ground as well. In view of the above discussion, I set aside the Orders of the authorities below and quash the proceedings under section 148 of the I.T.
Act. In view of the above, there is no need to decide remaining grounds of appeal on merit. All additions stands deleted.
In the result, appeal of Assessee is allowed.
Order pronounced in the open Court.