UMANG DESIGNERS PVT. LTD.,NOIDA vs. ITO, NEW DELHI

PDF · subscribers
ITA 2794/DEL/2017Status: DisposedITAT Delhi31 May 2018AY 2009-1011 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal admitted the additional ground raised by the assessee regarding the issuance of notice under Section 143(2) of the Income Tax Act, 1961, prior to the filing of the return, citing the Supreme Court's decision in *NTPC Limited*. The Tribunal found that the AO had issued a notice under Section 142(1)/143(2) on July 8, 2014, which was prior to the filing of the assessee's return of income on August 13, 2014. The assessment order itself confirmed that the return was filed on August 13, 2014. The Tribunal noted that issuing a notice under Section 143(2) before the filing of the return is not permissible under the law. Relying on the decisions of the Hon'ble Delhi High Court in *Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications*, the Hon'ble Allahabad High Court in *CIT vs. Rajeev Sharma*, and the Hon'ble Gauhati High Court in *Smt. Bandana Gogoi*, the Tribunal held that the reassessment proceedings initiated were illegal, unsustainable, and untenable. Consequently, the reassessment proceedings were quashed. As the reassessment was quashed, other grounds raised by the assessee became academic and were not adjudicated.

What were the facts?

The assessee, Umang Designers Pvt. Ltd., filed an appeal against the order of the Commissioner of Income Tax (Appeals)-9, New Delhi, for Assessment Year 2009-10. The appeal challenged the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961. The assessee raised several grounds, including the AO acting on directions rather than his own satisfaction, confirmation of additions without proper rebuttal, and additions made using information collected behind the assessee's back. Crucially, the assessee later filed additional grounds arguing that the reassessment was invalid due to the absence of a valid notice under Section 143(2) of the Act after the filing of the return, and that the notice was issued to a non-existent person as the company had been struck off the register. The assessee also argued that the notice under Section 143(2) was issued prior to the filing of the return.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, are valid, considering the AO allegedly acted on directions and not on his own satisfaction (Section 148). 2. Whether the additions made by the AO and confirmed by the CIT(A) are sustainable, given the assessee's contentions regarding lack of proper rebuttal, use of ex-parte information, and failure to establish the lender's group affiliation (Sections 68 and 147). 3. Whether the reassessment order is invalid due to the absence of a valid notice under Section 143(2) of the Act after the filing of the return, or if the notice was issued prior to the filing of the return (Section 143(2) and Section 148). Assessee's Contentions: - The reassessment proceedings are bad in law as the AO acted on directions and not his own satisfaction. - Additions were confirmed without rebutting evidence and without establishing the lender's group affiliation. - Information was collected behind the assessee's back without an opportunity for cross-examination or rebuttal. - A bald statement by a third party is dumb evidence unless correlated with facts. - The AO did not establish that the sum was taxed in the hands of the lender. - The primary onus was discharged by furnishing confirmations for the cash credit. - A company cannot earn income before commencing business. - The notice under Section 143(2) was issued prior to the filing of the return, rendering the proceedings illegal. Reliance was placed on *Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications* and *CIT vs. Rajeev Sharma*. - The company was struck off before the notice under Section 148 was issued, making the notice and subsequent proceedings invalid. Revenue's Contentions: - Relied upon the orders of the authorities below and opposed the admission of the additional ground.

Which sections of the Income-tax Act were involved?

Section 148,Section 143(2),Section 68,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI

Before: SHRI H.S. SIDHU

impugned order dated 26/10/2016 passed by the Ld. Commissioner of Income Tax (Appeals)-9, New Delhi on the following grounds:-

1. That learned CIT [A] has erred in not quashing

the re-assessment proceedings initiated u/s 148 of the Act.

1.2 That learned CIT [A] has erred in not quashing the re-assessment proceedings initiated by the AO acting at the directions of others and not on his own satisfaction arrived on his own examination of evidences

2.1 The learned CIT [A] has erred in confirming addition made by the learned AO without rebutting the confirmations & other evidences furnished by the appellant on cogent material and without establishing as to how the lender/ creditor company belonged to Surrinder Kumar Jain Group of companies as being alleged by the Department.

2.2 Additions made by using information collected behind the back of the assessee without confronting it and affording a chance of cross examination and chance to rebut them, despite a specific request for it thus the assessment is bad in law.

2.3 The authorities below have ignored the settled principle that a bald statement or scribbling by a third party, is a dumb evidence unless correlated with facts.

2.4 The learned AO / Department has not established that the said sum has been taxed in the hands of the lender or not-which is an essential ingredient.

3.1 The learned CIT[A] has erred in confirming addition of Rs 20,00,000 made by the learned AO as unconfirmed cash credit u/s 68.

3.2 The assessee has discharged its primary onus by furnishing confirmations etc furnished during the assessment proceedings for the sum received and returned.

3.3 The Authorities below have ignored the fact that a company before commencing business cannot earn disclosed /undisclosed income.

4. The above grounds are independent and without prejudice to each other.

5. The appellant seeks leave to add, amend,

alter or abandon any of the above grounds at the time of hearing of the appeal.

2.

On 27.09.2017, the assessee has filed the following additional ground :-

“That in the absence of issuance of notice u/s. 143(2) of the Income Tax Act, 1961 (the Act) after the filing of income tax return on 13th August, 2014, the AO has no valid jurisdiction to frame the assessment and consequently the assessment order as passed by the AO in furtherance of such invalid jurisdiction is also invalid.”

3.

Later on 21.02.2018, the assessee has also filed another additional ground which is reproduced as under-

“That the name of the assessee-company has been struck off from the register of the Registrar of Companies on 25th March, 2011 due to the dissolution of the company and consequently the issuance of notice dated 2nd September, 2013 u/s. 148 of the I.T. Act on a non-existent person is invalid and the assumption of jurisdiction by the AO in furtherance of such invalid notice is also invalid and bad in law and the order passed in furtherance of such invalid notice as well as assumption of jurisdiction is also invalid and bad in law.”

4.

At the time of hearing, Ld. Counsel of the assessee stated that in view of the settled decision in the case of NTPC 229 ITR 383 (SC), (legal ground can be raised for first time in collateral and second round also). The legal ground can be very well raised for first before the ITAT which goes to the root of the matter. Ld. Counsel of the Assessee has further stated that the above cited legal ground involves a question of law and arises from the facts that are already on records of the proceedings before the lower authorities. Hence, he requested that keeping in view of the decision of the Hon’ble Supreme Court of India in the case of NTPC 229 ITR 383 (SC) (Supra), the aforesaid legal additional ground raised by the assessee may be admitted and decided first.

4.1 But during the hearing, Sh. MP Rastogi, Advocate/Ld. Counsel for the assessee argued only additional ground raised on 27.09.2017 regarding issuance of notice us. 143(2) of the I.T. Act, 1961 which is before filing the return of income i.e. on 13.8.2014.

In this regard, he submitted that AO has issued notice u/s. 143(2) of the I.T. Act, on 08.07.2014 which was prior to the filing of the income tax return i.e. on 13.08.2014. He also draw my attention towards the assessment order page no. 2 to support this contention where the AO has himself written that on 13.8.2014 the counsel for the assessee appeared and filed the return of income for the assessment year 2009-10 alongwith copy of balance sheet and audit report declaring NIL income. He has also filed the photocopy of the order sheet of the assessment proceedings in the case of the assessee showing that on 08.07.2014 the AO has issued notice u/s. 142(1)/143(2) and fix the case of 16.7.2014. In nutshell, Ld. Counsel of the assessee stated that AO has issued the notice u/s. 143(2) on 08.07.2014 and subsequent to the notice the assessee has filed the return on 13.08.2014, which is not permissible under the law. Therefore, he submitted that the proceedings initiated are illegal, unsustainable and untenable under the law and needs to be quashed. To support his contention, he relied upon the following case laws: i) Hon’ble Delhi High Court decision dated

13.4.2010 in the case of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications reported (2010) 323 ITR 0249. ii) Hon’ble Allahabad High Court decision dated 24.5.2010 in the case of CIT vs. Rajeev Sharma reported (2011) 336 ITR 0678.

4. On the contrary, relied upon the orders of the authorities below and strongly opposed the request of admission of additional ground (legal) raised by the assessee, but could not produce any contrary decision.

5.

After hearing both the parties as well as perusing the additional ground raised argued by the ld. Counsel of the assessee alongwith the orders passed by the Revenue Authorities, I am of the considered view that in view of the decision of the Hon’ble Supreme Court of India in the case of NTPC Limited 229 ITR 383 (Supra), the additional ground raised by the assessee on 27.09.2017 relating to issuance of notice us. 143(2) of the I.T. Act, 1961 which is before filing the return of income i.e. on 13.8.2014 is purely a legal ground and did not require fresh facts which is to be investigated and goes to the root of the matter. In the interest of justice, I admit the aforesaid additional ground raised by the assessee, in view of the case law of NTPC Limited (Supra) and proceed to decide the legal additional ground first.

6.

I find that AO has issued notice u/s. 143(2) of the I.T. Act, on 08.07.2014 which was prior to the filing of the income tax return i.e. on 13.08.2014. I further note that the AO in his assessment order at page no. 2 has mentioned that on 13.08.2014 the counsel for the assessee appeared and filed the return of income for the assessment year 2009-10 alongwith copy of balance sheet and audit report declaring NIL income. I have also perused the photocopy of the order sheet entry dated 08.07.2014 of the assessment proceedings wherein, the following order was passed:-

“8/7/14 notice u/s. 142(1)/143(2) issued fixing the case for 16.7.14.

More judgments on Section 148

All 35,022 judgments and leading authorities on Section 148 →

Recent GST High Court judgments

Search GST case law →