SANJAY KUMAR SURANA,KOLKATA vs. PR.CIT-12, KOLKATA, KOLKATA

Grounds of appeal raised by the assessee are as under:- 1. (a) That on the facts and in the circumstances of the case, order u/s 263 dated 26.03.2019 is bad in law for the reason that the proceedings u/s 147 initiated itself was bad m law, the order u/s 143(3)/147 dated 27.12.2016 was not maintainable in law since no assessment can be made in absence of any notice u/s 143(2). (b) That on the facts and in the circumstances of the case, the order u/s 263 is also otherwise bad in law for the reasons that no addition was made for the reasons recorded for reopening. of the assessment u/s 147 and as such no other addition could have been made by the AO, therefore the Pr. CIT cannot direct the AO to enquire and make addition. (c) That on the facts and in the circumstances of the case, Ld. Pr. (IT is wrong and unjustified in taking jurisdiction u/s 263 over a re-assessment order u/s 143(3)/147 which is void ab-initio and invalid for AO's failure to comply with the mandatory requirements u/s 147. 2. That on the facts and in the circumstances of the case, the view taken by the AO was a possible view and just because the Pr. CIT has a different view, jurisdiction u/s 263 of the Act cannot be invoked. 3. That on the facts and in the circumstances of the case, Ld. Pr. CIT is wrong and unjustified in giving directions again u/s 263 to AO for re- 1 I.T.A No. 902/Kol/2019 A.Y 2009-10 Sanjay Kumar Surana

The brief facts of the case are that the assessee has filed his R.O.I (Return of Income) for the A.Y 2009-10 on 21-12-2009 declaring total income at Rs. 2,01,620/-. The AO notes the assessee has shown his income under the head ‘Business’. According to the AO, he has re- opened the assessment for scrutiny on the basis of an information received from ADIT (Inv.), U-3(4), Kolkata that the assessee had deposited Rs. 237.20 lakh in the bank accounts maintained in the name of his proprietorship concern, M/s. Sanjay Traders during the financial year 2008-09 under consideration. According to the AO, there is no reflection of business in the return filed by the assessee. According to AO, from the perusal of return of income filed by the assessee it is seen that the assessee’s income arises out of transactions passing through the bank accounts in the name of M/s. Sanjay Traders which has remained undisclosed. Therefore, he reopened the assessment and for doing that he issued notice u/s. 148 on 21-03-2016 proposing his desire to re-open the assessment u/s. 147 of the Act. Thereafter, the AO records that reasons to reopen was duly communicated to the assessee and notice u/s. 142(1) dt. 21-11-2016 along with questionnaire were issued; and after serving upon the assessee the notices, the assessee replied to the AO to treat the original return of income as filed in response to 142(1) notice issued. Thereafter, the AO after scrutinising the assessment of the assessee was pleased to accept the return of income as filed and completed the assessment u/s. 143(3)/147 as per re-assessment order dt. 27-12-2016. 4. Thereafter, the Ld. PCIT vide show cause notice issued u/s. 263 of the Act dt. 05- 12-2018 proposed to exercise his revisional jurisdiction in respect of assessment order dt. 27-12-2016. Thereafter, the ld. PCIT by the impugned order passed u/s. 263 of the Act has set aside the order of AO dated 27.12.2016, with a direction to the AO to verify the factual averments submitted by the Ld. AR before him, which action of Ld. CIT has been challenged by the assessee before us.

We note that the main grievance of the assessee is against the action of the ld. PCIT in assuming/exercising his jurisdiction u/s. 263 of the Act to interfere with the order of the AO passed u/s. 143(3)/147 of the Act dt. 27-12-2016, which according to the ld.AR of the assessee is that the said reassessment order of the AO (dated 27.12.2016) itself is bad in law for non issuance of mandatory notice u/s. 143(2) of the Act. The ld.AR in order support the

On merits of the case, the Ld. AR submitted that it is evident from facts of the case that during the re-assessment proceedings pursuant to the notice issued u/s. 142(1) of the Act, the assessee explained before the AO that both the Bank accounts as stated in the reasons recorded have been owned up by Mr. Pankaj Jhawar (PAN AEVPJ7732B) and M/s. Sulabh Commodities Pvt. Ltd. (PAN AAKCS 8474Q) before the ADIT (lnv) Unit -3(4) and consequently the income in those accounts have been duly paid by them. It was also explained by the assesse before the AO and it was urged by the assessee that these facts could be verified from the respective assessment records of Mr. Pankaj Jhawar and that of M/s. Sulabh Commodities Pvt. Ltd. (supra). In the said back drop, the assessee submitted that since these accounts were never maintained or owned by assessee, the question of escapement of income does not arise. The assessee had filed before the AO, the Disclosure petition filed by Pankaj Jhawar and Assessment order of Sulabh Commodities Pvt. Ltd. and after enquiry on these facts and after considering the above explanation, the AO took a plausible view and did not make any addition in the hands of the assessee, which cannot be faulted, since the AO has discharged the duties of an investigator and that of the adjudicator. And since the AO has made enquiry on the issue, the view taken by the AO cannot be taken as unsustainable in law, since the Ld. Pr. CIT did not carry out any independent enquiry to show that AO’s enquiry was misdirected on wrong assumption of facts. 7. As noted earlier, we note that pursuant to the notice issued by the AO u/s. 142(1) of the Act, the assessee answered all the 18 (eighteen) questions and have submitted all the documents and explanation to the questions. The AO after conducting examination of the

For the aforesaid proposition on merits, we also rely upon the following judicial precedents:

Per contra, the Learned Departmental Representative vehemently opposed the arguments of the ld. AR and in support of the impugned order of the ld. PCIT, and does not want us to interfere with the order of the ld. Pr. CIT . Countering the legal proposition made by Ld. AR that issuance of notice u/s. 143(2) of the Act is not mandatory in reopening 4 I.T.A No. 902/Kol/2019 A.Y 2009-10 Sanjay Kumar Surana

We find that the assessee had filed return of income on 21-12-2009 declaring income of Rs.2,01,620/- and thereafter, it was processed u/s. 143(1) of the Act (refer pages 26-28 of paper book) dt. 7-1-2011. Thereafter, the AO reopened the assessment after recording reasons, and issued notice u/s. 148 dt. 21-03-2016 (refer page 18 of paper book) directing assessee to file Return of Income (ROI), pursuant to which assessee replied vide letter dated 06.04.2016 (refer page 20 of paper book) to treat the original ROI dated 21.12.2009 as compliance to the notice u/s. 148 of the Act and thereafter gave a copy of reasons recorded to assessee on 27.05.2016 thereafter, issued notice u/s. 142(1) dt. 21-11- 2016 (refer to page 22 of paper book) pursuant to which assessee replied vide letter dated 24.1.2016 (refer to pages 24-25 of paper book) and without issuing notice u/s. 143(2) of the Act, the AO completed the assessment without making any addition, though admittedly the AO opened for reasons that income has escaped assessment in respect of bank deposits.

Thus, we find that in response to notice u/s. 148 of the Act, the assessee had filed a letter dated 08/04/2016 wherein he requested the AO to treat the original return filed dated 21.12.2009 u/s. 139(1) as return u/s. 148 of the Act. We note that thereafter the AO failed to issue any notice u/s. 143(2) of the Act till the reassessment order was passed on 27.03.2016. We are of the opinion that before the reopened proceeding culminated in the framing of re- assessment it was incumbent upon the assessing officer to issue notice u/s. 143(2) of the Act,

For this view of ours, we rely on the following judgments:- ACIT -vs- Hotel Blue Moon 321 1TR 362(SC) CIT -vs- 1.5. Leather in GA No. 277 of 2013 ITAT 27 of 2013 dated 04/04/2013. Oberoi Hotels Pvt. Ltd. -vs- DCIT in ITA No. 472/Ko1/2012 for A.Y. 2006-07 Alok Mittal vs. DCIT reported in 1671TD 325 [Kolkata ITAT] PCIT Vs. Oberoi Hotel Pvt. Ltd. (Cal) (supra)

We note that the re-assessment order was the primary proceeding and proceeding initiated u/s. 263 of the Act are collateral proceedings and that this Tribunal has taken this view that the validity of initiation of primary proceeding can be even challenged in collateral / proceeding if the primary proceeding itself culminated in a void order and for this proposition, we rely on the decision of Kolkata Tribunal in M/s. Classic Flower & Food Processing Pvt. Ltd. Vs. CIT ITA No. 764-766/Kol/2014 dated 05.04.2017; and that of Lucknow Bench of ITAT in the case of Indar Kumar Bachani (HUF) vs. ITO reported in 99 ITD 621 and decision of ITAT Mumbai 'G' Bench in the case of West Life Development Ltd. Vs. PCIT in ITA No. 688/Mum/2016.

We also take note of the ratio laid by the Hon'ble Supreme Court in the case of Kiran Singh & Ors., Chaman Paswar & Ors (1955) 1 SCR 117 wherein Hon'ble Supreme Court has observed as follows :-

From the aforesaid discussion, we are of the considered opinion that the re- assessment order of AO dated 27.12.2016 was not valid since the AO didn’t issue the mandatory notice u/s. 143(2) of the Act before the reassessment order was passed. The omission to issue the mandatory notice u/s. 143(2) of the Act has vitiated the reassessment 6 I.T.A No. 902/Kol/2019 A.Y 2009-10 Sanjay Kumar Surana

In the result, the appeal of the assessee is allowed.