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Facts
The assessee, a registered stamp vendor, deposited Rs. 28.63 Lakhs in cash during the demonetization period and did not file a return of income. The Assessing Officer (AO) made a best judgment assessment under section 144, adding Rs. 2,14,56,756 to the income. The CIT(A) partly allowed the appeal, deleting the Rs. 28.63 Lakhs addition but sustaining the balance addition.
Held
The Tribunal found that the CIT(A) exceeded his powers by setting aside the matter back to the AO. Relying on the case of Arun Kumar Bose vs. ITO; Siliguri, the Tribunal held that the CIT(A)'s order was beyond the powers provided by the statute. Consequently, the matter was restored to the file of the CIT(A) with a direction to call for a remand report from the AO.
Key Issues
Whether the CIT(A) exceeded his powers by setting aside the matter to the AO, and whether the appeal should be restored to the CIT(A) for adjudication.
Sections Cited
250, 144, 139, 142(1), 251
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI ANIKESH BANERJEE & SHRI GAGAN GOYAL, ACCOUNTANT
This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC), Delhi dated 17.01.2024 passed u/s.250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2017-18. The assessee has raised the following grounds of appeal:-
On the facts and in the circumstances of the case and in law the CIT (A) erred in not deciding and considering the legal grounds of appeal
with written submission dt. 20th Sept 2021 made as stated in para no.4 of the order itself by CIT(A) especially on the assessment order being void with further it being passed in violation of CBDT instruction and further also did not consider the submission made on 27th Dec 2019 filed along with appeal.
2. On the facts and circumstances of the case and in law the CIT (A) erred in ignoring the legal submissions made and keeping SILENT on it renders all such orders as invalid which is well settled law.
3. On the facts and circumstances of the case and in law the CIT (A) erred in partly allowing the appeal by dropping the additions made of Rs. 28, 63,000/- which is the amount deposited during demonetization period and the only point on which the appellants case was selected for scrutiny and when the same does not survive then the whole appeal was to be allowed.
4. On the facts and circumstances of the case and in law the CIT(A) erred in not considering the facts that the mandatory notice under section 147/148 was not issued resulting the assessment order framed and passed is without jurisdiction void ab initio null and void.
5. On the facts and circumstances of the case and in law the CIT(A) erred by exceeding his powers as mandated in section 251 in directing the AO to compute the income in a particular manner and that too is on presumption basis with further instructions to once again passing a speaking order.
6. On the facts and circumstances of the case and in law the CIT (A) erred in not granting a personal hearing before passing order to the prejudicial interest of the appellant. The Appellant has not received the order of CIT (A) but on 13th May 2024 received letter no ITBA/COM/F/17/2024-25/1064805550(1) dated 10th May 2024 from ITO Ward 2(2) Kalyan asking to submit relevant documents to re-compute the profit as per directions of CIT (A) NFAC Delhi and after the receipt of this letter the appellant came to know that the order has been passed and then downloaded the CIT Order FROM THE INCOME TAX PORTAL. Therefore there is no delay on the part of appellant to file the appeal against the CIT Order and however if there is delay found, then the same be condoned in the interest of Justice and further if directed the appellant shall file separate delay condonation application.
The appellant has not filed any appeal before high court and or Supreme Court of India. The appellant craves leave to add, amend, modify, alter, vary, delete and/or withdraw any of the above ground of appeal
. The Appellant prays that: 1. The Appeal be admitted and allowed fully. 2. The Impugned order be quashed and set aside. 3. The Income added of Rs 2, 14, 56,760/- be deleted 4. The assessment order is declared as ab into null and void. 5. Any other relief deem fit.
The brief facts of the case are that the assessee is an Individual deposited cash amounting to Rs. 28.63 Lacs in State Bank of India, Badlapur Branch.Case of the assessee was selected was selected in AIMS Data for cash deposit in bank account of Specified Bank Notes (SBN) during the demonetization period. It is also observed by the Revenue that the assessee is a non-filer of return for the year under consideration. Accordingly, a notice u/s. 142(1) of the Act was issued vide dated: 26.12.2017. Later on, a notice u/s. 142(1) of the Act was issued on 03.05.2019 asking to furnish certain details along with supporting documentary evidences. The assessee failed to submit the same; then again a fresh notice was issued to the assessee on 13.08.2019. In response to the same the assessee Individual submitted as under:
“The assessee submitted the reply stating that she was doing business as a facilitator for issuing stamp of government of Maharashtra. She further stated that clients required making stamp duty payments for their documents transfer to her account the required duty amount and she pay it to Government from her account. She also stated that she is not having bank statement for F.Y. 2015-16 and 2016-17 and having income within the exemption limit.”
Since the assessee did not submit the bank statements and proper supporting documentary evidences w.r.t. cash deposits in her account during the year under consideration, again on 13.09.2019, the assessee was given a show cause as to why the assessment should not be completed as per the provisions of section 144 of the Act. As the assessee failed to furnish any valid return u/s. 139 and in compliance to section 142(1) of the Act and there is no substantial compliance to the other notices issued asking to substantiate the deposit in bank account, ultimately, the assessment of the assessee was completed as “Best Judgment Assessment” u/s. 144 of the Act.
During the year under consideration other than deposit of SBNs during the demonetization period, the bank statement obtained by the department reflects that there were total credits/receipts to the tune of Rs. 18, 59, 37,563/- (Other than Rs. 28.63 Lacs mentioned above). Considering these facts the AO completed the assessment on a figure of Rs. 2, 14, 56,756/- (Rs. 28.63 Lacs + 10% of Rs. 18, 59, 37,563/-). The assessee being aggrieved with this action of the AO, preferred an appeal before the Ld. CIT (A), who in turn partly allowed the appeal and deleted the addition of Rs. 28.63 Lacs and sustained the balance addition of Rs. 1,85,93,756/-. The assessee being further aggrieved preferred the present appeal before us.
We have gone through the order of the AO (Passed u/s. 144 of the Act, as no ITR filed by the assessee and relevant information also not submitted before him), Order of the Ld. CIT (A) passed u/s. 250 of the Act and submissions of the assessee before us along with grounds taken before us. It is observed that the assessee individual is a registered stamp vendor and buying Maharashtra State Govt. Stamps on behalf of her clients for various purposes such as sale/purchase of property, lease deed and mortgage deed etc. The response of the assessee is not at all appreciable. As, she did not file her return of income, neither voluntarily u/s. 139 nor in response to section 142(1) of the Act. As far as the liability of the assessee to file return of income is concerned, we deem it fit to reproduce herein below the provisions of section 139 and 142 of the Act as under:
Section - 139, Income-tax Act, 1961 - FA, 2023 Return of income. 139.(1) every person,— (a) being a company or a firm; or (b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, Shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: Provided that a person referred to in clause (b), who is not required to furnish a return under this sub-section and residing in such area as may be specified by the Board in this behalf by notification in the Official Gazette, and who during the previous year incurs an expenditure of fifty thousand rupees or more towards consumption of electricity or] at any time during the previous year fulfils any one of the following conditions, namely:— (i) is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or (ii) is the owner or the lessee of a motor vehicle other than a two- wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two- wheeled motor vehicle or not; or (iii) [***]
(iv) has incurred expenditure for himself or any other person on travel to any foreign country; or (v) is the holder of a credit card, not being an "add-on" card, issued by any bank or institution; or (vi) is a member of a club where entrance fee charged is twenty-five thousand rupees or more, Shall furnish a return, of his income during any previous year ending before the 1st day of April, 2005], on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: Provided further that the Central Government may, by notification in the Official Gazette, specify the class or classes of persons to whom the provisions of the first proviso shall not apply: Provided also that every company or a firm shall furnish on or before the due date the return in respect of its income or loss in every previous year: Provided also that a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6, who is not required to furnish a return under this sub- section and who at any time during the previous year,—
(a) holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India; or (b) is a beneficiary of any asset (including any financial interest in any entity) located outside India, Shall furnish, on or before the due date, a return in respect of his income or loss for the previous year in such form and verified in such manner and setting forth such other particulars as may be prescribed: Provided also that nothing contained in the fourth proviso shall apply to an individual, being a beneficiary of any asset (including any financial interest in any entity) located outside India where, income, if any, arising from such asset is includible in the income of the person referred to in clause (a) of that proviso in accordance with the provisions of this Act:] Provided also that every person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an artificial juridical person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year, without giving effect to the provisions ofclause (38) of section 10 or section 10A or section 10B or section 10BAor section 54 or section 54B or section 54D or section 54EC or section 54F or section 54G or section 54GA or section 54GB or Chapter VI-A exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: Provided also that a person referred to in clause (b), who is not required to furnish a return under this sub-section, and who during the previous year—
(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or {Only relevant part of the section 139 reproduced (In bold and underline)}
Section - 142, Income-tax Act, 1961 - FA, 2023 Inquiry before assessment. 142. (1)For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 or in whose case the time allowed under sub-section (1) of section 139 for furnishing the return has expired a notice requiring him, on a date to be therein specified,—
(i) where such person has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or :
Provided that where any notice has been served under this sub-section for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this sub-section:
Provided further that a notice under this sub-section for the purposes of this clause may also be served by the prescribed income-tax authority,
(ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or (iii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require :
Provided that—
(a) the previous approval of the Joint Commissioner shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts;
(b) The Assessing Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.
(2) For the purpose of obtaining full information in respect of the income or loss of any person, the Assessing Officer may make such inquiry as he considers necessary. (2A) If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of the accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, direct the assessee to get either or both of the following, namely:—
(i) to get the accounts audited by an accountant, as defined in the Explanation below sub- section (2) of section 288, nominated by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars, as may be prescribed, and such other particulars as the Assessing Officer may require;
(ii) to get the inventory valued by a cost accountant, nominated by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in this behalf and to furnish a report of such inventory valuation in the prescribed form duly signed and verified by such cost accountant and setting forth such particulars, as may be prescribed, and such other particulars as the Assessing Officer may require:
Provided that the Assessing Officer shall not direct the assessee to get the accounts so audited or inventory so valued unless the assessee has been given a reasonable opportunity of being heard.] (2B) the provisions of sub-section (2A) shall have effect notwithstanding that the accounts of the assessee have been audited under any other law for the time being in force or otherwise. (2C) every report under sub-section (2A) shall be furnished by the assessee to the Assessing Officer within such period as may be specified by the Assessing Officer: Provided that the Assessing Officer may, suo moto, or on an application made in this behalf by the assessee and for any good and sufficient reason, extend the said period by such further period or periods as he thinks fit; so, however, that the aggregate of the period originally fixed and the period or periods so extended shall not, in any case, exceed one hundred and eighty days from the date on which the direction under sub-section (2A) is received by the assessee. (2D) The expenses of, and incidental to, any audit or inventory valuation under sub-section (2A) (including the remuneration of the accountant or the cost accountant, as the case may be)] shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner (which determination shall be final) and paid by the assessee and in default of such payment, shall be recoverable from the assessee in the manner provided in Chapter XVII-D for the recovery of arrears of tax : Provided that where any direction for audit or inventory valuation under sub-section (2A) is issued by the Assessing Officer on or after the 1st day of June, 2007, the expenses of, and incidental to, such audit or inventory valuation (including the remuneration of the accountant or the cost accountant, as the case may be)shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in accordance with such guidelines as may be prescribed and the expenses so determined shall be paid by the Central Government. (3) The assessee shall, except where the assessment is made under section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any inquiry under sub-section (2)or any audit or inventory valuation under sub-section (2A)] and proposed to be utilised for the purposes of the assessment. (4) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year. Explanation.––For the purposes of this section, "cost accountant" means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who holds a valid certificate of practice under sub-section (1) of section 6 of the said Act.
In view of the provisions of section 139(1), Fifth Proviso and section 142(1) of the Act, the assessee was liable to file the return of income and the assessee’s arguments on non-filing of return is legally non-tenable. Rather, in the guise of (Assessee’s claim that her income is below the limit) low taxable income, the assessee is violating the mandatory provisions of law as discussed (supra).
Very smartly the assessees is playing a hide & seek in technical terms, but never came with clean and substantive evidences to establish her claim about below taxable limit. We have considered the judicial pronouncements and CBDT Instruction No. 03/2017, Dated: 21.02.2017 relied upon by the assessee and it is found that the Ld. CIT(A) has already considered the same and granted relief also relying on Instruction No. 03/2017, Dated: 21.02.2017(Addition of Rs. 28.63 Lacs).
As far as judicial pronouncements in the case of CIT vs. Smt. Nayana P. Dedhia (2004) 270 ITR 572 (By the Hon’ble Andhra Pradesh High Court) and Reuters Asia Pacific Ltd. Vs. DCIT, International Tax, Circle-4(1)(1), Mumbai (ITA No. 587/Mum./2021) by the coordinate bench are concerned, both have no use, considering the facts of the matter. Certainly the judicial pronouncement relied upon by the assessee in the case Arun Kumar Bose vs. ITO; Siliguri has relevance here considering the ground no. 5 raised by the assessee. Before discussing the ratio laid down by the Hon’ble High Court, we deem it fit to discuss the provisions of section 251 of the Act as under:
Section - 251, Income-tax Act, 1961 - FA, 2023 Powers of the [Joint Commissioner (Appeals) or the] [Commissioner (Appeals)]. 251. (1) In disposing of an appeal, the [Commissioner (Appeals)] shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; The portion beginning with the words "or he may set aside" and ending with the words "on the basis of such fresh assessment;" omitted by the Finance Act, 2001, w.e.f. 1-6-2001. Prior to its omission, the quoted portion was amended by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978
(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;]
(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) In any other case, he may pass such orders in the appeal as he thinks fit. (1A) in disposing of an appeal, the Joint Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit.] (2) The [Joint Commissioner (Appeals) or the] [Commissioner (Appeals)] [, as the case may be,] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the [Joint Commissioner (Appeals) or the] [Commissioner (Appeals)], may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the [Joint Commissioner (Appeals) or the] [Commissioner (Appeals)] [, as the case may be,] by the appellant.
In view of amendment in section w.e.f. 01.06.2001, it is certain that the First Appellate Authority is not empowered to set aside the Appeal before him and the assessee’s reliance on Arun Kumar Bose vs. ITO; Siliguri has a legal strength. In view of the above facts it is observed that despite of non-cooperation by the assessee and poor representation of the matter before the AO, as discussed (supra), the Ld. CIT (A), exceeded his powers by setting aside the matter back to the AO, technically his order is faulty and considering the ratio laid down in the case of Arun Kumar Bose vs. ITO; Siliguri, we declare the order as beyond the powers provided by the statute. In view of the above, we restore the matter back to the file of Ld. CIT (A) with a direction to call for a remand report from the AO and then adjudicate the matter of the assessee. In the result ground no. 5 raised by the assessee is allowed for statistical purposes.. All other grounds raised by the assessee are found to be baseless, hence rejected.
In the result, appeal of the assessee is partly allowed for statistical purposes.