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Income Tax Appellate Tribunal, DELHI “C” BENCH,
Before: SHRI R.K. PANDA & MISS SUCHITRA KAMBLE
PER R.K. PANDA, ACCOUNTANT MEMBER:- The above appeals filed by respective assessees are directed against the separate orders dated 22.02.2012 of the CIT(A)-XXV, New Delhi relating to A.Y. 2001-02. Since identical grounds have been taken by both the assessees in their respective appeals, therefore, these were heard together and are being disposed of by this common order.
Facts of the case, in brief are that the assessee is a HUF and filed its return of income on 17.10.2001 declaring total income of Rs. 41,214/-. In this case, the A.O had received information from Addl. DIT[INV], Ghaziabad vide letter F. No. Add. DIT[INV]/GZB/AES/SM/Bogus Gifts/79/2007-08/1286 dated 26.03.2008 that the assessee has received Rs. 5 lakhs through cheque No. 328638 dated 17.05.2000 from Shri Sanjay Mohan Aggarwal in the garb of gift. Accordingly, after recording reasons and obtaining prior approval of Addl. CIT, Range-29, New Delhi the A.O issued notice u/s 148 of the I.T. Act, 1961 to the assessee on 31.03.2008. The assessee, in response to the same, filed a letter stating that original return filed on 17.10.2001 may be treated as return filed in response to notice u/s 148 of the Act. The assessee also requested to supply a copy of reasons recorded for reopening of the case. The A.O supplied such reasons to the assessee vide letter dated 28.7.2008.
Subsequently, in response to notice u/s 143(2) of the Act, the assessee appeared before the A.O and filed certain details such as memorandum of gift, affidavit and photocopy of cheque through which gift was routed and copy of bank statement of the assessee. The A.O also obtained bank statement of the donor Shri Sanjay Mohan Aggarwal from Vijaya Bank, Ansari Road, New Delhi through summons u/s 131 of the Act dated 21.11.2008 for the period from 01.04.2000 to 31.03.2001. The said statement showed regular cash deposits as well as transfer entries of the said amount immediately transferred to different persons including that of the assessee. The A.O, therefore, deputed the Ward Inspector to make necessary enquiries regarding the genuineness of the addresses given in the Memorandum of Gift/Affidavit in respect of the donor alongwith summons u/s 131 of the Act dated 05.12.2008 for personal deposition of the donor on 12.12.2008 for the verification of the gift transaction. The Inspector, vide his report dated 08.12.2008, stated that the donor never resided at the addresses as given in the Memorandum of Gift/Affidavit. The A.O thereafter issued a detailed show cause notice u/s 142(1) of the Act to the assessee summarizing the above and asked the assessee to explain as to why the gift of Rs. 5 lakhs should not be treated as bogus and added to his total income as income from undisclosed sources.
4. The assessee, in his detailed reply, submitted that due to great love and affection, Shri Sanjay Mohan Aggarwal had given the gift of Rs. 5 lakhs to the assessee vide cheque drawn on Vijaya Bank. The assessee had no business to look into the nature of transactions in the bank account of the person making the gift. It was submitted that there may be thousands of reasons for deposits of cash and/or for transfer entries in anybody’s bank account and the assessee is not the right person to comment on the transactions appearing in the bank account of another person. So far as request of the A.O to produce Shri Sanjay Mohan Aggarwal is concerned, it was stated by the assessee that he is not in a position to produce the donor since he had died on 06.07.2005.
However, the A.O was not satisfied with the explanation given by the assessee. Relying on various decisions including the decision of the Hon'ble Supreme Court in the case of Sumati Dayal reported in 214 ITR 801 he held that the gift received by the assessee is not genuine since the assessee was not able to prove the genuineness of such gift as bonafide. Therefore, the provisions of section 68 are clearly attracted. Since the assessee failed to prove the creditworthiness of the donor, the A.O, invoking the provisions of section 68 of the Act made addition of Rs. 5 lakhs to the total income of the assessee as income from undisclosed sources.
6. Before the ld. CIT(A), the assessee challenged the addition of Rs. 5 lakhs made by the A.O u/s 68 of the Act. The validity of notice issued u/s 148 of the Act was also challenged on the ground that the A.O has not disposed off the objections raised by the assessee against the issue of notice u/s 148 of the Act.
However, the ld. CIT(A) was also not satisfied with the arguments advanced by the assessee and upheld the action of the A.O in making the addition of Rs. 5 lakhs u/s 68 of the Act. He also rejected the ground raised by the assessee challenging the validity of reassessment proceedings in absence of non disposal of objections raised by the assessee.
Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before us with the following grounds: “1. That on the facts of the case and under the law, the initiation of proceedings u/s 147 / issuance of notice u/s 148, was arbitrary, unjust & illegal. The authorities below have failed to appreciate the provisions of law / the law laid down by the Hon’ble Courts.
2. That on the facts of the case and under the law, the Id. CIT(A) has erred in not quashing the reassessment proceedings / reassessment order, particularly when the Id. A.O. has failed to discharge his obligation, to dispose of the objections filed by the assessee, by passing a speaking order.
3. That on the facts of the case and under the law, the addition of Rs.5,00,000/-, as made by the Id. A.O. u/s 68, was not called for, because the assessee had fully discharged his onus.
The proceedings before the Id. Addl. DIT(Inv.), Ghaziabad, could not be attended by Sh. Sanjay Mohan Aggarwal, as he was not alive during that period (he expired on 06.07.2005).
Due to the same reason, the assessee could not produce Sh. Sanjay Mohan Aggarwal before the Id. A.O. during the course of re-assessment proceedings.
4.That on the facts of the case and under the law, charging of interest u/s 234-A is arbitrary unjust and illegal.
5.That on the facts of the case and under the law, charging of interest u/s 234-B is arbitrary unjust and illegal.
The ld. Counsel for the assessee, at the outset, submitted that after receiving reasons recorded by the A.O for issuing notice u/s 148 of the Act, the assessee has filed objections, copy of which is placed at pages 9 to 11 of the assessee’s paper book. However, the A.O without disposing of the objections raised by the assessee for such issuance of notice u/s 148 of the Act by passing a speaking order, had completed the assessment. Referring to the decision of the Hon'ble Delhi High Court in the case of Ferrous Infrastructure Pvt. Ltd & Anr Vs. DCIT reported in 120 DTR 281 [Del] he submitted that the Hon'ble High Court in the said decision has held that in the absence of a separate speaking order disposing of the objections before completing assessment, notice u/s 148 of the Act has to be quashed and accordingly, subsequent proceedings pursuant to such notice u/s 148 including the assessment order has to be quashed.
In his second plank of argument, the ld. AR submitted that the A.O has issued notice u/s 148 of the Act on the basis of information received from Addl. [Inv], Ghaziabad vide letter dated 26.03.2008 that the assessee has received gift of Rs. 5 lakhs from Shri Sanjay Mohan Aggarwal. However, he has not come to any independent conclusion that he has reason to believe that the income of the assessee has escaped assessment. Referring to the decision of the Hon'ble Delhi High Court in the case of Principal CIT Vs. G & G Pharma vide order dated 08.10.2015, he submitted that the Hon'ble High Court in the said decision has held that before issue of notice u/s 148 of the Act, the A.O must apply his mind to the materials and conclude that he has reason to believe that income of the assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analyzing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. He submitted that the A.O, in the instant case, has not applied his mind and he has proceeded on the basis of letter of the Addl. DIT [INV] only and therefore, on this count also, reassessment proceedings are liable to be quashed.
So far as the merits of the case are concerned, the ld. AR referring to various pages of the paper book, submitted that the assessee has filed relevant details, such as, copy of gift deed, photocopy of affidavit of Shri Sanjay Mohan Aggarwal dated 29.04.2000, photocopy of bank statement of assessee with Vijaya Bank reflecting the credit entry of Rs. 5 lakhs and account of the assessee evidencing the receipt of cheque. The assessee has also filed photocopy of the passport of Shri Sanjay Mohan Aggarwal reflecting his residential address as 4674, Shora Kothi, Pahar Ganj, New Delhi. He has also filed copy of assessment order of Shri Sanjay Mohan Aggarwal for A.Y 2004-05 passed by the ACIT, Central Circle -10 u/s 143(3) of the Act dated 27.03.1997. He submitted that when the assessee has proved the identity and creditworthiness of the donor as genuineness of the transaction the lower authorities should not have disbelieved the gift. He submitted that the donor is already dead and, therefore, it is not possible on the part of the assessee to produce the donor.
Referring to the order of the Delhi ‘B’ Bench of ITAT in the case of Shri Rajesh Kumar Narang Vs. ITO in dated 09.02.2016 for A.Y 2001-02, he submitted that under identical circumstances, the Tribunal has allowed appeal filed by the assessee and deleted the addition made by the A.O and upheld by the ld. CIT(A). He accordingly submitted that the grounds raised by the assessee both on legal issue as well as on merits should be allowed.
The ld. DR, on the other hand, heavily relied on the order of the ld. CIT(A). Referring to various decisions, he submitted that reopening u/s 148 of the Act on the basis of information received from DIT [INV] is justified. For the above proposition, he relied on the following decisions: i) CIT Vs. Neelkanth Ispat Udhyog Pvt Ltd Delhi High Court ii) CIT Vs. Nipun Builders and Developers Pvt Ltd Delhi High Court ITA No. 427/2012 iii) CIT Vs. N.R. Portfolio Pvt Ltd Delhi High Court ITA No. 1018/2011 dated 22.1.2013
So far as the merits of the case is concerned, he submitted that the burden of proof is on the assessee. The assessee has to prove the identity and capacity of the donor and genuineness of the transaction. In the instant case, the assessee has failed to discharge the onus cast on him. Referring to the following decisions, he submitted that the addition made by the A.O and sustained by the ld. CIT(A) is justified under the facts and circumstances of the case: i. Kale Khan Mohammad Hanif Vs. CIT [1963] 50 ITR 1 [SC] ii CIT Vs. Mohanakala [2007] 291 ITR 278 [SC] iii. Indus Valley Promoters Ltd Vs. CIT [2008] 305 ITR 202 [Del] iv. Bhartesh Jain Vs. DCIT [Del] 483 CTR Vol 201 dated 7.4.2006 v. CIT Vs. Biju Patnaik 160 ITR 674
So far as the arguments of the ld. AR that the A.O has not disposed of the objections raised on reopening of the assessment is concerned, the ld. AR referring to the decision of the Hon'ble High Court in the case of Smt.
Kamlesh Sharma Vs. B.L. Meena, ITO & Ors reported at 287 ITR 337 [Del] submitted that he has no objection if the matter is restored to the file of the A.O with the direction to give an opportunity to the A.O to dispose of the objections filed by the assessee by passing a speaking order.
The ld. AR has, in his rejoinder, submitted that the Hon'ble Delhi High Court in subsequent decisions has held that if the A.O does not dispose of the objections raised by the assessee on the reopening of the assessment, then consequent assessment order has to be quashed. He submitted that the subsequent decision of the Hon'ble High Court will prevail over the earlier decision.
We have considered the rival arguments made by both the sides, perused the orders of the A.O and the ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied upon by both the sides. We find since the assessee in the instant case has shown to have received gift of Rs. 5 lakhs from one Shri Sanjay Mohan Aggarwal. The A.O, on the basis of specific information received from the Addl DIT [INV] Ghaziabad, vide letter dated 26.7.2008 had recorded reasons that the assessee had received accommodation entry of Rs. 5 lakhs from Shri Sanjay Mohan Aggarwal in the guise of gift. The A.O, accordingly, recorded reasons and issued noticed u/s 148 of the Act by reopening assessment after obtaining prior approval of the Addl. CIT, Range 29, New Delhi. We find the assessee after receiving the notice u/s 148 of the Act filed a letter requesting the A.O to treat the original return filed on 17.10.2001 as return filed in compliance to notice u/s 148 of the Act. The assessee also filed a letter requesting the A.O to supply copy of reasons recorded for reopening of the case. We find after the A.O supplied such reasons, the assessee filed a letter raising certain objections against the issue of notice u/s 148. A copy of such objections against issuance of notice u/s 148 of the Act for A.Y 2001-02 is placed at pages 9 to 11 of the assessee’s paper book. Although the said letter is undated, however, a perusal of the assessment record which was produced during the course of hearing reveals that the assessee has filed such letter before the A.O. However, we find the A.O has not disposed of the objections raised by the assessee for such reopening of the assessment.
We find the assessee has also raised specific grounds before the ld. CIT(A) against non disposal of the objections as per Ground of appeal No. 2 which reads as under:
“That the reassessment order deserves to be quashed because the A.O had not disposed off the objections raised by the appellant apropos the reasons recorded for issuance of notice u/s 148.”
However, we find the ld. CIT(A) has not discussed this issue at all. Under these circumstances, we have to adjudicate first as to whether the reassessment proceedings are valid or not in the absence of disposal of objections raised by the assessee to such reopening of the assessment. We find the Hon'ble Delhi High Court in the case of Ferrous Infrastructure Pvt. Ltd & Anr [supra] has held that the A.O has to dispose of the objections if filed by passing a speaking order before proceeding with the assessment. If the A.O does not pass speaking order disposing of the objections raised by the assessee, notice u/s 148 of the Act has to be quashed. Relevant observations of the Hon'ble High Court read as under:
“We may also point out that the second issue raised by the learned counsel for the petitioners also deserves some consideration. In GKN Driveshafts (supra), the Supreme Court had directed as under:-
"However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years."
(underlining added) On going through the same, it is evident that the Assessing Officer has to pass a speaking order disposing of the objections "before proceeding with the assessment". In the present case, a separate speaking order has not been passed and the objections have been dealt with, if at all, in the re-assessment order itself. On this ground also, the petitioner is liable to succeed.”
We find the Hon'ble Delhi High Court in the case of Principal CIT Vs. Tupperware India P. Ltd reported at 284 CTR 68 [Del] has observed as under:
In the resultant assessment order dated 28th December 2006, the AO recorded that "since the Assessee did not raise any objection to the proposed reassessment after having conveyed the reasons recorded under Section 148 of the Act, there is no need to dispose of the same prior to reassessment."
5. Apparently, the Assessee did raise an objection to the order of the AO reopening the assessment. In the order dated 28th January 2011 allowing the Assessee’s appeal, the Commissioner of Income Tax (Appeals) [“CIT(A)‟] noted that the Assessee had indeed filed objections to the reopening of the assessment by its letter dated 9th August 2006. In the remand report dated 20th December 2010, the AO quoted a paragraph from the order sheet which stated that the aforementioned letter dated 9th August 2006 had been handed over to the AO and that the AO had sought some more information which the Assessee had not filed. The CIT (A) accordingly held that by stating that no objections had been filed, the AO had "very
conveniently disregarded the guidelines" laid down by the Supreme Court in G.K.N. Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC). The CIT (A), therefore, agreed with the Assessee that since the procedure laid down by the SC in the aforementioned decision was mandatory, the AO had in fact not disposed of the objections by a speaking order. Nevertheless, the CIT (A) held that the said defect "does not make the assessment order illegal and hence it cannot be quashed. It is a technical mistake which is curable."
The Court is of the considered view that after having correctly understood the decision of the Supreme Court in G.K.N. Driveshafts (India) Ltd. (supra) as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections to the reopening order with a speaking order, the CIT (A) committed an error in not quashing the reopening order and the consequent assessment.”
Since in the instant case it is an admitted fact that the A.O has not disposed of the objections raised by the assessee to such reopening of the assessment u/s 148 of the Act by passing a speaking order, therefore, such reassessment order is liable to be quashed. So far as the argument of the ld. DR that the matter should be restored to the file of the A.O with the direction to dispose of the objections raised by passing a speaking order, in the light of the decision of the Hon'ble High Court of Delhi in the case of Smt Kamlesh Sharma [supra] and that the assessment order need not be quashed is concerned, we do not find any merit in the same since the later decision of the Hon'ble High Court will prevail over the previous decision. Since various decisions relied upon by the ld. AR on this issue are subsequent to the decision of the Hon'ble High Court of Delhi in the case of Smt. Kamlesh Sharma [supra], therefore, we are of the considered opinion that the later decision of the Hon'ble High Court will prevail. We, therefore, hold that since the A.O has not disposed of the legal objections raised by the assessee for such reopening of assessment u/s 148 of the Act by passing a speaking order before completion of assessment, therefore, such consequent order passed by the A.O is void and illegal and therefore, is liable to be quashed. Since the assessee succeeds on this preliminary legal issue, other grounds raised by the assessee being academic in nature are not being adjudicated. The appeal filed by the assessee is according allowed.
After hearing both the sides, we find that the grounds raised in this appeal are identical to the grounds raised by the assessee in . We have already decided the issue and the appeal filed by the assessee has been allowed. Following the same reasoning the grounds raised by the assessee in this appeal are also allowed.
In the result, the appeals filed by the respective assessees are allowed. Order pronounced in the open court on 13.04.2017.