AJAY KUMAR,GHAZIABAD vs. ITO, WARD- 1(5), GHAZIABAD

This appeal filed by the assessee is directed against the order dated 01.03.2017 of CIT(A), Ghaziabad relating to assessment year 2009-10.

Facts of the case, in brief, are that on the basis of AIR information that the assessee has purchased immovable property valued at Rs.76,44,000/- on 18.12.2008, the Assessing Officer issued a verification letter fixing the date for compliance on or before 30.11.2012. Since there was no compliance from the side of the assessee to the said letter, the Assessing Officer issued reminders which were duly served on the assessee. However, again there was no compliance. Thereafter, the Assessing Officer issued notice u/s 148 fixing the date for compliance within 30 days from the date of service of notice. Again, there was no compliance to the said notice u/s 148. The Assessing Officer thereafter issued notice u/s 142(1) dated 30.08.2013 along with questionnaire fixing the date for compliance on 11.09.2013. Again, the same remained uncomplied. Thereafter, several notices u/s 142(1) were issued, in response to which the Authorized Representative of the assessee appeared before the Assessing Officer and filed certain details as required by the Assessing Officer.

Since no documentary evidence was furnished in support of above contentions, the Assessing Officer asked the assessee to furnish the bank statement and gift deed of Smt. Mithlesh and Shri Satpal, copy of income-tax return, bank statement and balance sheet of the assessee, copy of sale deed along with calculation of capital gain of the land sold and explain the source of Rs.6,00,000/- with documentary evidence.

The counsel for the assessee produced Smt. Mithlesh, wife of the assessee, whose statement was recorded in the said statement. She refused to have given any type of gift in any year to her husband. However, she stated to have possessed about 1 kg of gold upto 2008 which was sold by her husband for about Rs.4,00,000/- and the same was invested in the purchase of land.

So far as the gift obtained from Shri Satpal Singh is concerned, the Assessing Officer observed that his statement was recorded on 04.02.2014 wherein he had stated to have made cash gift of Rs.5,00,000/- to Shri Ajay Kumar but failed to prove the source of gift made to Shri Ajay Kumar. He also failed to recollect the occasion on the eve of which gift was made. Since he was not assessed to tax and did not file any evidence to explain the source of Rs.5,00,000/-, the Assessing Officer disbelieved the creditworthiness of Shri Satpal Singh brother of the assessee and made addition of Rs.5,00,000/- u/s 69 to the total income of the assessee.

So far as Rs.15,00,000/- received from Shri Vijay Kumar as earnest money against agreement to sale of agricultural land is concerned, the Assessing Officer observed that the assessee furnished only PAN of Shri Vijay Kumar and copy of agreement to sale deed but failed to produce Shri Vijay Kumar and copy of bank statement of Shri Vijay Kumar. The Assessing Officer, therefore, disbelieved creditworthiness of Shri Vijay Kumar and made addition u/s 69 of the I.T. Act. Similarly, in absence of any documentary evidence filed to explain the availability of Rs.6,00,000/- with the assessee, the Assessing Officer made addition of Rs.6,00,000/- u/s 69 of the I.T. Act. Thus, the Assessing Officer made addition of Rs.32,00,000/- to the returned income against income of Rs.74/- filed by the assessee. He accordingly determined the total income at Rs.32,00,074/-.

In appeal, ld. CIT(A) upheld the addition made by the Assessing Officer.

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

The assessee has also raised the following additional grounds :-

Relying on the following decisions, he submitted that the additional grounds being purely legal grounds raising jurisdictional issues which go to the root of the matter should be admitted :-

After hearing both the sides, the additional grounds raised by the assessee are admitted for adjudication.

Ld. counsel for the assessee at the outset submitted that no notice u/s 143(2) has been issued to the assessee. Referring to page 2 to 4 of the Paper Book, ld. counsel for the assessee submitted that the assessee has filed the return of income on 16.01.2014. Referring to the copy of the order sheet entries filed from page 5 to 10 of the Paper Book, ld. counsel for the assessee submitted that the order-sheet entries clearly shows that no notice u/s 143(2) was ever issued and served on the assessee. Referring to the decision of the Hon’ble Allahabad High Court in the case of CIT vs. Parikalpana Estate Development (P.) Ltd. reported in 220 Taxman 39, he submitted that the Hon'ble High Court in the said decision has held that notice u/s 143(2) is necessary where for any reason Assessing Officer repudiates return filed by assessee in response to notice u/s 158BC relating to block assessment.

Referring to the decision of the Hon’ble Gujarat High Court in the case of Pr.CIT vs. Devendranath G. Chaturvedi reported in 83 taxmann.com 141, he submitted that the Hon'ble High Court in the said decision has held that where the assessee, in response to notice issued u/s 158BC, filed a return after long delay, however, said return was not discarded as invalid, in such a case, if the Assessing Officer wanted to frame assessment at higher income, he was bound to issue a notice u/s 143(2).

Referring to the decision of the Hon’ble Delhi High Court in the case of Pr.CIT vs. Silver Line reported in 383 ITR 455, he submitted that the Hon'ble High Court in the said decision has held that the failure of the Assessing Officer, in re-assessment proceedings, to issue notice u/s 143(2) prior to finalizing the re-assessment order, cannot be condoned by referring to section 292BB of the I.T. Act. He submitted that since the assessee in instant case has filed the return of income, though belatedly, declaring total income of Rs.74/- which has been mentioned in the body of the assessment order as returned income, therefore, in absence of issue of notice u/s 143(2), the entire re- assessment proceedings have to be quashed.

So far as merit of the case is concerned, he submitted that the assessee has discharged the onus cast on it by filing the requisite details. Merely because the face of the wife of the assessee is very simple and she has not worn any jewellery the same cannot be a ground to disbelieve her capacity to own 1 kg. of gold. Further, when the assessee produced the brother of the assessee before the Assessing Officer who had confirmed to have given gift of Rs.5,00,000/- to the assessee, the same should not have been disbelieved. So far as the amount received from Shri Vijay Kumar is concerned, he submitted that Shri Vijay Kumar is a regular taxpayer having income of Rs.11,63,289/- during assessment year 2008-09 and, therefore, his capacity go give advance for purchase of land should not have been doubted.

Referring to the order of the ld. CIT(A) at para 8.3.1, he submitted that the ld. CIT(A) has given a finding that Shri Vijay Kumar has withdrawn a sum of Rs.22,93,462/- from his capital account. Therefore, merely by stating this cash withdrawal can be used for any other purpose other than the above stated purpose by the assessee, he could not have rejected the claim of the assessee in absence of any adverse material with the revenue. So far as investment of Rs.6,00,000/- out of own source is concerned, he submitted that the same is out of accumulated savings out of agricultural income of the assessee. He accordingly submitted that the addition made by the Assessing Officer u/s 69 is uncalled for and the ld. CIT(A) without appreciating the facts properly has upheld the addition and, therefore, the same should be deleted.

Ld. DR, on the other hand, relied on the order of the ld. CIT(A). He submitted that the assessee has not satisfactory explained the source of investment of Rs.32,00,000/- towards purchase of land. Merely producing the persons before the Assessing Officer in two cases without substantiating with evidence regarding their creditworthiness is not sufficient to prove the availability of so much funds with them. So far as amount received as advance towards sale of agricultural land is concerned, he submitted that the assessee miserably failed to substantiate with evidence to the satisfaction of the lower authorities regarding such advance. So far as availability of cash of Rs.6,00,000/- with the assessee is concerned, he submitted that when the assessee is maintaining bank account, it is unbelievable to hold such huge cash with him. Further, the wife of the assessee has denied to have given any gift to her husband. The jewellery has been sold in cash and purchaser did not respond to the notice u/s 133(6). Under these circumstances, the order of the ld. CIT(A) should be upheld and the grounds raised by the assessee should be dismissed.

So far as the argument of the assessee regarding issue of notice u/s 143(2) is concerned, he submitted that the assessee has not filed the return in time in response to the notice u/s 148. Therefore, the assessee now cannot raise a ground challenging the validity of the re-assessment proceedings in the absence of notice issued u/s 143(2) of the I.T. Act.

Ld. counsel for the assessee in his rejoinder submitted that none of the earlier notices were received by the assessee whose name is Ajay Pal as mentioned in PAN Card/Aadhar Card, though in the sale deed, the name Ajay Kumar is mentioned. In response to notice dated 17.12.2013, the AR of the assessee appeared before the Assessing Officer on 06.01.2014 and intimated the Assessing Officer orally about the above facts and on the same date the Assessing Officer allowed last opportunity for compliance and copies of the said notice u/s 148 along with notice u/s 142(1)/questionnaire dated 30.08.2013 were given to assessee. He submitted that on 16.01.2014, the assessee filed the return in compliance to notice u/s 148 before the Assessing Officer specifically mentioning about filing of return with its copy in response to notice u/s 148 besides compliance to questionnaire u/s 142(1) as above. The Assessing Officer had considered the return and referred to the same on page 3 for additions/computation. No further notice u/s 148, 142(1) or u/s 143(2) was issued thereafter. He accordingly submitted that in absence of notice u/s 143(2), the assessment completed by the Assessing Officer enhancing the income of the assessee has to be set-aside.

I have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the ld. CIT(A) and the Paper Book filed on behalf of the assessee. A perusal of the order-sheet entries shows that although the Assessing Officer has issued notice u/s 148 by recording the reasons on 11.02.2013, however, there is no mention of any notice issued u/s 143(2) in the order sheet entries, copies of which are filed in the Paper Book from page 5 to 10 of the Paper Book. The order-sheet entries further show that on 06.01.2014 when the AR of the assessee appeared before the Assessing Officer and filed certain details, the Assessing Officer issued copy of notice u/s 148 and copy of notice u/s 142(1) dated 30.08.2013 along with questionnaire. A perusal of the Paper Book further shows that the assessee has filed return of income on 16.01.2014 declaring total income of Rs.74/- and the Assessing Officer has mentioned the same in the assessment order as Rs.74/-. Thus, the return filed by the assessee has been considered by the Assessing Officer. However, as mentioned earlier, there is no issue of notice u/s 143(2) which appears from the order-sheet entries. Under these circumstances, it has to be decided as to whether the assessment completed by the Assessing Officer is valid or not.

The Hon’ble Delhi High Court in the case of Pr.CIT vs. Silver Line (supra) has held that the reassessment order cannot be made without compliance with the mandatory requirement of notice being issued by the Assessing Officer to the assessee u/s 143(2). The Hon’ble Allahabad High Court in the case of CIT vs. Rajeev Sharma reported in 336 ITR 678 has held that where return is filed by the assessee in response to notice u/s 148, before proceeding to deicide the controversy with regard to escapement of assessment a notice u/s 143(2) must be issued as provisions contained in section 143(2) is mandatory. The Hon’ble Gujarat High court in the case of Devendranath G. Chaturvedi (supra) has held that where the assessee in response to notice u/s 158BC, filed a return after long delay and the said return was not discarded as invalid, in such a case if the Assessing Officer wanted to frame assessment at higher income, he was bound to issue a notice u/s 143(2) which is necessary if for any reason the Assessing Officer repudiates the return filed by the assessee in response to notice u/s 158BC relating to block assessment. Since the assessee in the instant case has filed the return of income in response to notice u/s 148, though belatedly and since the return has not been discarded by the Assessing Officer and the Assessing Officer in the assessment order has mentioned the return of income of Rs.74/- while making further addition, therefore, in absence of any issuance of mandatory notice u/s 143(2), the re-assessment order passed by the Assessing Officer has to be held is invalid. The additional ground raised by the assessee on this issue is therefore allowed. Since the assessee succeeds on this legal ground, the grounds raised by the assessee on merit are not being adjudicated being academic in nature.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on this 26th day of December, 2017.