VASHDEV G ADNANI,MUMBAI vs. ACIT 19(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “F”, MUMBAI

Before Shri Saktijit Dey, Judicial Member & Shri Rajesh Kumar, Accountant Member ITA No.2322/Mum/2014 Assessment Year : 2005-06 Vashdev G Adnani, ACIT 19(1) G-4, Sea Crest, 2nd Floor, Mumbai Vs. Seven Bunglows Gardens, Andheri (W), Mumbai 400 061. PAN ABAPA7414M (Appellant) (Respondent)

Appellant By : Shri Prakash Pandit Respondent By : Shri Saurabh Kumar Rai

Date of Hearing :13.04.2018 Date of Pronouncement : 18.05.2018

O R D E R Per Rajesh Kumar, Accountant Member

The aforesaid appeal has been filed by the assessee against the impugned order dated 31.01.2014, passed by the CIT(A)- 30, Mumbai, for the assessment year 2005-06.

I) On the fact & in the circumstances of the case and In law, the learned C.I.T.(A) erred in passing exparte Order dismissing the Appeal after rejecting the request for Adjournment of the Hearing till the Honourable I.T.A.T. decides the Appeals on involving similar grounds of Appeals for Assessment Years 1999-2000, 2000-2001, 2003-2004 and 2004-2005, pending before the Honourable I.T.A.T.

II) On the facts & in the circumstances of the case and in law, the learned C.I.T.(A) erred in confirming the addition of Rs.2,10,30,089, being the value of Foreign Exchange allegedly

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brought into India by the Appellant on visits to India, in the accounting year relevant to the Assessment Year in Appeal, as per the CDF Form, copies of which were obtained from the DRI's office. The Appellant used to Take Back his Foreign Exchange brought by him visiting to India, on return to Hong-Kong, where he was permanently residing. This fact has been ignored by the Assessing Officer, and the C.I.T. (A) while confirming the addition of Rs.2,10,30,089 relying upon the Appellate Order of the C.I.T. (A) for other years which are in Appeal before the I.T.A.T.

iii) On the facts & in the circumstances of the case and in law, the learned C.I.T. (A) erred in confirming the findings of the Assessing Officer that the Cash deposits of Rs. 14,78,072 in the Punjab and Maharashtra Co-op. Bank Ltd., in the name of Mr. Subodh Thakur, as benami holdings of the Appellant and, therefore, the said amount of Rs. 14,78,072 is assessable in the hands of the Appellant as unexplained cash credit.

iv) On the facts & in the circumstances of the case and in law, the learned C.I.T. (A) erred in Disallowing a sum of Rs. 1,01,553 as interest payable on the loan of Rs. 12,51,395 from his wife, on the ground that the Appellant's wife did not show the interest income of Rs. 1,01,553 in her Income Tax Return for the AY: 2005-2006.

v) On the facts & in the circumstances of the case and in law, the learned C.I.T. (A) erred in Disallowing 15% expenses out of Motor Car Expenses, Telephone Expenses and Electronic Equipments Depreciation. vi) On the facts & in the circumstances of the case and in law, the learned CIT(A) erred in levying interest Under Section 234B & C of the Income Tax Act, 1961.” Further, the assessee vide application dated 25.05.2016 has filed an application for the admission of the following additional grounds of appeal.

“i) On the facts and circumstances of the case and in law; the Assessment Order passed U/s.143(3) of the Act dated 31.12.2007 is void ab-initio; ii) On the facts and circumstances of the case and in law, the order passed U/s. 143(3) is bad in law in absence of Notice u/s. 143(2) of the Act.”

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limitation as the same was passed after the last date on which the order should have been passed by the AO. The issue has been settled by the coordinate bench in the earlier years in the assessee own case in ITA No 2968/M/2011 (supra) in the same search assessment. The operative part of the decision of the co-ordinate bench is reproduced as under:

“4. Considering the above, we are of the opinion that one of the issues for determination is whether the present proceedings which were taken in pursuance of notice u/s.148 dated 20.02.2006 for AY.s.1999-2000, 2000-01, 2001-02 & 2004-05 can be treated as proceedings u/s. 153A of the Act and accordingly can be rectified u/s. 292B of the Act, as stated in the Cross objections of the AO filed on 01.12.2008.Second issue is whether the re-assessment proceedings initiated by the AO were valid? One of the questions for the AY. 2004-05 is again the validity of the assessment. In that matter the AO had issued the Notice u/s.147 during the pendency of the assessment proceedings, though a Notice u/s. 143(2) of the Act was issued by the AO in pursuance of the valid return filed by the assessee on 30/10/2004.

4.1. We have heard the rival submissions and perused the material available on record. We find that the AO, vide his cross objections dated 01.12.2012,has argued that the assessments completed u/s.148 should be treated as assessment finalised u/s.153A of the Act. It clearly indicates that an action 132/132A was taken in the case under consideration. But, in response to a query raised under RTI Act on 7/12/2012 by the assessee, the AO had stated that no search was conducted in the case under appeal and that no panchanama was drawn. Thus, two diagonally opposite stands have been taken by the AO. It is beyond our comprehension as to how the same officer can say that search was conducted in the case of the assessee in one breath and in another he denies the same fact. From the documentary evidences available on the files it is clear that an action u/s.132A of the Act was carried out by the investigation wing of the department in the case of the assessee and a panchnama was also drawn. Therefore, the stands taken by the JCIT and the AO in the forwarding letter of the Remand Report and in furnishing reply to the assessee with regard to RTI Act respectively are factually incorrect.

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4.2.Once,it is established that it is a search-case, then it has to be held that it would to be governed by the provisions of section 153A of the Act, as the action u/s.132A was taken after 31.05.2003. Explaining the scope of the section 143A,the Hon‟ble Jharkhand High Court has, in the case of Abhay Kumar Shroff (290 ITR114),held as under:

“From a bare reading of the provisions of sections 153A, 153B and 153C of the Income -tax Act, 1961 and the Departmental Circular No. 7 dated September 5, 2003, it is manifestly clear that after May 31 ,2003,the earlier provision of block assessment in the case of search initiated against the assessee, shall not apply. Instead, the provision that there shall be single assessment on undisclosed income comprising previous years relating to six assessment years preceding that in which the search was conducted, shall apply. It further provides that the Assessing Officer shall issue notice to such person requiring him to furnish return of income in respect of six assessment years immediately preceding the assessment year relating to the previous year in which the search was conducted under section 132 or requisition was made under section 132A of the Act. The second proviso to section 153A makes it clear that assessment or reassessment relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A shall abate. In other words, if on the date of initiation of search or requisition under section 132 or section 132A any assessment or reassessment proceeding is initiated relating to any assessment year falling within the period of six assessment years, it shall stand abated and the assessing authority cannot and shall not proceed with such pending assessment after initiation of search or requisition. The word “abatement” means the act of eliminating or nullifying or suspension or defeat of a pending action.” Hon‟ble Delhi High Court in the case of Saraya Industries Ltd. has (306ITR189) incorporated some more principles related with the section in following manner:

The opening portion of section 153A of the Income-tax Act, 1961, makes it clear that it applies to a person in respect of whom a search is initiated under section 132 of the Act, or whose books of account, other documents or any assets are requisitioned under section 132A after May 31, 2003. Section 153C of the Act is with reference to a person in respect of whom any money, bullion, jewellery or other valuable articles or things

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or books of account or documents seized or requisitioned belong. The persons mentioned in section 153A of the Act are specifically excluded from section 153C of the Act. The procedure that is sought to be followed in respect of these two categories of persons has been provided for in sections 153A and 153C of the Act. That the procedure in respect of both of them overlaps or is similar is hardly of any consequence, since both have to be treated in accordance with the principles of natural justice. It is clearly mentioned in the substantive portion of section 153C(1) of the Act that the Assessing Officer shall proceed against a person covered by the section by issuing a notice to him for the purpose of assessing or reassessing his income. The very fact that notice is required to be issued clearly postulates that the principles of natural justice are incorporated in the provision. There is nothing arbitrary in the procedure adopted. Essentially both the categories of persons are the same inasmuch as their books of account, assets, documents, etc., are seized or requisitioned, though from different locations. Moreover, the seizure or requisition must be of such a character as to persuade the Assessing Officer to even reopen closed assessments. In this sense, there is no hostile discrimination between the two categories of persons.”

From the above it is clear that for the actions taken w.e.f.01.06.2003,assessments will have to be completed as per the scheme of section 153A.The section provides for issuing of notice for assessing or reassessing the income of an assessee. From the records and the Grounds of Co.s.it clear that though in the cases under consideration notices had to be issued u/s.153 A of the Act, but were not issued. The AO had issued notices u/.148 of the Act. Issue of notice u/s.153A and 148 has been decided by the Hon‟ble M P High Court, in the case of Ramballabh Gupta (288ITR347), as under:

“In order to decide the legality and validity of the notice issued under section 148 of the Income-tax Act, 1961, it is necessary to see as to whether the conditions precedent provided in section 148 are satisfied or not. Once the conditions prescribed under section 148 are found present in the notice issued, in that event, the notice has to be upheld having been issued in conformity with the requirement of section 148. The only fetter put on the powers of the Assessing Officer in taking recourse to section 148 is that it cannot be issued in relation to those six assessment years which are defined in section 153A.(emphasis supplied). In all other cases

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and for all other assessment years section 148 can always be resorted to subject of course to the condition that it must satisfy the requirement specified in section 148.”

4.3. Now, we would take up the issue as to whether the provisions of section 292 B can be invoked for treating the re- assessment proceedings as proceedings u/s.153A of the Act, as argued by the Revenue. Section 292B of the Act, which says that no return of income furnished under the Act shall be invalid merely by reason of any mistake, defect or omission in such return of income, if it, in substance and effect, is in conformity with or according to the intent and purpose of the Act, was introduced into the Act with effect from 01.10.1975. In the statement of objects and reasons, published in the Gazette dated 09.05 1973,for Bill No.34 of 1973 - 89 ITR(St.)33),it is stated, at clause 80, referring to section 292B,that it seeks to provide against purely "technical objections" without substance coming in the way of the validity of assessment proceedings, etc. In the Departmental Circular No. 179 dated 30.09. 1975 -102 ITR(St.)28), explaining the scope of section 292B, it is stated that the provision has been made to provide against purely technical objections without substance coming in the way of the validity of assessment proceedings, etc. Courts have held that it was not retrospective. Over the years the law regarding the provisions of section 292 B have evolved and it has taken a definite shape. Here, we would like to mention certain principles governing the section 292B and same can be summarised as under:

i.) If an assessee does not file his return of income in the prescribed Form as envisaged by the provisions of the Act, the return filed by him has to be ignored as not filing of return is not curable by the provisions of section 292B of the Act. ii.) An irregularity in not scoring out portions of the form of warrant of search does not affect the exercise of their power by the authorities. In any case, such defect would be cured by section 292B. iii.) The signing of a notice issued under s.271(1)(a) of the Act, for showing cause why penalty should not be imposed on the assessee for delay in filing returns, is not a mere inconsequential technicality. It is a requirement of the provisions of O.5, r. 1(3) of the Civil Procedure Code, 1908, which are applicable by virtue of the provisions of section 282 of the Act. Section 282 of the Act provides that a notice under the Act may be served on the person named therein

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as if it were a summons issued by a court under the CPC,1908. Sub-rule (3) of r. 1 of O. 5 of the CPC provides that every summons shall be signed by the judge or such officer as he appoints. Therefore, in view of this provision, the notice to show cause why penalty should not be levied by the ITO should be signed by the AO and the omission to do so invalidates the notice and in such a situation section 292 B will not come to rescue of the AO. iv.) Section 292B might apply to a case where service of notice had already been effected and there is only a technical mistake in the notice. But, where no notice had been served, the section would not come to the help of the Department e.g. if a notice is not issued to a minor or to his guardian or the Karta of the HUF and such notice affects the rights of the minor adversely, the proceedings initiated in pursuance of that notice cannot be cured by the provisions of section 292B of the Act. v.) Where an assessment order containing computation of income is signed by the AO, but the computation of tax made on separate sheet of paper is not signed by him, the assessment cannot be held invalid. In such cases, courts are of the views that it is not a case of non-compliance with mandatory provision. Such an assessment cannot be held invalid because of the existing provisions of section 292B of the Act. vi.) A Composite notice asking an assessee to pay balance advance tax and stating that on failure to pay assessee to show cause why penalty should not be levied it has been held valid„ having regard to the purport of the notice and the provisions of section 292B‟. vii.) Converting the proceeding under section 147(b) into a proceeding under section 147(a) of the Act, is invalid. It is said that Section 292B does not empower the AO to treat a proceeding taken under one section as a proceeding under another section, that it is not a „mere technicality‟, but, was a„ question of jurisdiction‟. viii.) In case of an Association of persons if a notice for not furnishing return of income is issued to an individual without specifying whether it was issued to principal officer or member of AOP, then the AO is not competent to re-assess the income of the AOP consisting of that person and others. Defect in issue of notice in such a case could not be cured by reliance on section 292B of the Act.

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ix.) In case of a deceased assessee if the legal representatives are impleaded and heard and after that if the assessment order is passed in the name of the deceased instead of the legal heirs, the order has to be taken as a “clerical mistake‟ in light of the provisions of the section under consideration. x.) The Tribunal has no power to enhance the assessment, but that does not mean that an order which is set aside by the first appellate authority cannot be restored. In case of any mistake orerror, the Tribunal has the power to have recourse to section 292B of the Act.(224ITR57). xi.) The provision in section 139(9)overrides the other provisions of the Act including section 292B of the Act. xii.) According to section 140 of the Act, every return has to be signed and verified. The word "shall" has been used in the section which shows that it is mandatory that every return should be signed and verified and if it is not signed and verified, then it is in breach of the provisions of section 140 of the Act. Therefore, this cannot be a defect which can be cured as per the provisions of section 292B of the Act and any return filed without signature and verification of the assessee will not be treated as a valid return. xiii.) Time barring assessment does not come within the purview of mistake, defect or omission referred in section 292B of the Act. In Peeru Lal, Mohan Lal (257ITR198), Hon‟ble Rajasthan High Court held that the expression “mistake, defect or omission” cannot be understood as one of procedure, so as to override the limitation prescribed by law. xiv.) Cancelling the registration of the firm on the ground of error in the allocation of shares among the partners, without issuing notice under section 158r.w.s.187 and 67 of the Act proposing to change the share allocation among the partners, involves question of jurisdiction and therefore direction given to AO to modify the order u/s.158 cannot be sustained by relying on section 292B. xv.) Provisions relating to issue of notice for block period are considered procedural and not substantive in nature. Therefore mention of block period wrongly in notice cannot render entire assessment a nullity as the defects are curable under section 292B.Secondly,in block assessment if a notice is issued under section 158BC r.w.s.158BD of the Act and the AO fails to mention Sec. 158BD in the notice, it is not considered fatal. It is said that the defect in mentioning a particular section is curable under section 292B and

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consequent block assessment order is considered within jurisdiction. xvi.) After insertion of section 292 B of the Act, an appeal cannot be dismissed due to defect in memorandum, because it is only a technical defect and can be cured. xvii.) Penalty proceedings cannot be held invalid because the AO had not struck off the column for which the assessee was not required to give reply. xviii.) If a return of company is not signed by managing director but by a person authorised by board resolution the defect in signing the return is curable under section 292B. xix.) Under section 151 of the Act, it is only the Joint Commissioner or Additional Commissioner, who could grant the approval for issue of notice u/s.148 and in such cases if the approval is granted by the Commissioner it is not an irregularity that is curable by section 292B.Courts have held that such notices are invalid. xx.) General mistakes in filing return are protected by the section 292 B of the Act e.g.if four units of a company file separate returns at same time disclosing losses and subsequently a consolidated return incorporating loss of all four units containing same information is filed, the original returns remain valid and technical mistake stands removed on filing of revised return. In such a matter revised return would relate back to date of filing of original returns. From the above, it clear that if any minor defect is there which does not militate against the intent and purpose of the Act then such defect can be cured u/s.292 B of the Act, but the section does not come to the assistance of the Revenue, where there is a fundamental infirmity in the assessment. It cannot confer jurisdiction, where jurisdiction has not been properly assumed. In the matter of Norton Motors(275ITR595),the Hon‟ble P&H High court has held as under:

“To put it differently, section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an

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inherent lacuna affecting his /its jurisdiction, the same cannot be cured by having resort to section 292B.”

If the facts of the case under appeal are considered in light of the above discussion, it becomes clear that the provisions of section 292B are not applicable. In the cross objections the AO wants us to treat us the assessment completed u/s.148 as assessment finalised u/s.153A of the Act. In our opinion, both the sections deal with different situations and notice issued under one section cannot be treated notice under another section nor can be assessment made under a particular section can be treated as finalised under another section. Section 147-148 deal with re-assessing of income for a particular AY. that escapes taxation because of the failure of the assessee or othrerwise. Section 153A deals with the matters where action has been taken u/s.132 or 132A of the Act. Each and every section of the Act has been included in the statue with a specific intention and purpose. The Legislature in its wisdom has introduced various section to regulate the tax collection. So, to assume that one section is re-placable by another is not a logical or legal conclusion. Each section, each phrase and each word of the Act has its own place and importance. If an AO commits a mistake while passing assessment orders, it cannot be cured by relying upon any other section, because such a mistake is not a clerical mistake-it relates to jurisdiction. The “mistake/defect or omission‟ in notices issued by the AO u/s.148 instead of section 153A of the Act is not “in conformity with /according‟ to the intent and purpose of the Act. Jurisdictional issues cannot fall in the category of clerical mistakes-they go the roots of the assessment. In these circumstances, we are of the opinion that orders passed by the AO for the AY.1999-2000,2001-01,2001-02 are not valid. As far as the assessment of AY.2004-05 is concerned, it is found that the AO had issued notice u/s.143(2) of the Act and before completing the original assessment had issue a notice u/s.148 of the Act. We cannot comprehend as how can an AO issue a notice for reassessing escaped income during the pendency of the assessment itself. The chronological events discussed in earlier clearly show that the AO had issued notice u/s.148 for that year on 20.02.2006 and the assessment was completed on 29.12.2006.Besides he has issued notice u/s.143(2)on 17.2.2005.Considering these facts, we are of the opinion that the assessment order for the AY.2004-05 was invalid. Additional grounds taken by the assessee are to be allowed for all the years and the cross objections raised by the AO are rejected.”

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We, therefore, are of the opinion that the case of the assessee is fully covered by the detailed order of the co-ordinate Bench in the assessee’s own case for A.Y. 2002-03. Respectfully, following the said order, we set aside the order of the CIT(A) and hold that the assessment of the Assessing Officer is invalid and void ab-initio as the same was barred by limitation as provided u/s. 153B(b) of the I.T.Act.

Since the assessment made by the Assessing Officer has eventually been quashed by us as void ab-initio, the other grounds taken by the assessee does not require any adjudication.

Order pronounced in the open court on this day of 18th May, 2018

Sd/- Sd/- (Saktijit Dey) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 18th May 2018 SA

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Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), Mumbai. 4. The CIT 5. The DR, ‘F’ Bench, ITAT, Mumbai

BY ORDER, //True Copy// (Assistant Registrar) Income Tax Appellate Tribunal, Mumbai