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Income Tax Appellate Tribunal, DELHI BENCH “SMC-3”, NEW DELHI
Before: SHRI H.S. SIDHU
ORDER ORDER ORDER ORDER The Assessee has filed the present appeal against the impugned order dated 22/10/2015 passed by the Ld. Commissioner of Income Tax (Appeals), Ghaziabad on the following grounds:-
1 That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining an order of assessment under section 143(3) of the Act at an income of Rs.43, 34, 060/- as against returned income of Rs.17,54, 060/-.
2 That the Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining the initiation of proceedings under section 143(2) of the Act and, further completion of assessment under section 143(3) of the Act without satisfying the statutory pre-conditions for initiation of the proceedings and, completion of assessment under the Act.
2.1 That the learned Commissioner of Income Tax (Appeals) has otherwise also failed to appreciate that the assessment order dated 28.12.2007, passed by learned assessing officer is without jurisdiction and void-ab-initio and is liable to be quashed, as no notice under section 143(2) of the Act was issued and served by the prescribed authority and, in view thereof the proceedings initiated are illegal, untenable and, therefore unsustainable.
3 That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining an addition of Rs. 13,70,000/- on account of unexplained credits/ loans received from three parties under section 68 of the Act.
3.1 That the detailed evidence/ material/ information furnished by the assessee - appellant in order to support the aforesaid, have all been arbitrarily brushed aside by the learned CIT (A) and the disallowance so sustained is based on assumptions, presumptions, surmises and conjectures and that too without any evidence/ material gathered or enquiry conducted to establish to the contrary, and hence the addition so sustained is unsustainable and liable to be deleted.
4 That the learned Commissioner of Income Tax (Appeals) has further erred in law and on facts in sustaining an addition of Rs. 10,00,000/- on account of alleged unexplained cash deposits in the account of the assessee - appellant during the impugned assessment year.
4.1 That in doing so, the learned Commissioner of Income Tax (Appeals) has ignored the basic fact that the cash deposited in bank account amounting to Rs. 10 lacs was out of past withdrawals from the bank account, which was duly explained to the learned CIT (A), which explanation has been arbitrarily rejected and that too on assumptions, presumptions, surmises and conjectures and hence the addition so sustained is unsustainable and liable to be deleted.
5 That the learned Commissioner of Income Tax (Appeals) has further erred in law and on facts in treating the agricultural income of the assessee - appellant amounting to Rs. 2,10,000/- as income from other sources, and that too by ignoring the past history of the assessee - appellant and further sustaining the same on mere suspicion and surmises and in ignorance of documentary evidences so filed and so, the addition needs to be deleted.
6 That the learned Commissioner of Income Tax (Appeals) has further grossly erred in relying on the judgments totally inapplicable to the facts of the case of the appellant company. 3 7 That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in sustaining addition in the hands of assessee company, without giving any fair and proper opportunity of being heard to the appellant company, thereby, violating the principles of natural justice.
The facts in brief are that the assessee is running proprietorship business in the name of M/s Growell Education Consultancy Services as well as through franchisee which provide complete set of information and assistance to the students aspiring for foreign studies as well as foreign education programme. Assessee has filed his return of income on 24.9.2011 declaring income of Rs.17,54,060/-. The case was selected for scrutiny through CASS. Accordingly, Notice u/s. 143(2) of the I.T. Act,1961 dated 23.8.2012 was issued by the ITO, Ward 4(2), Patna. The notice was duly served on the assessee and vide his reply dated 03.9.2015, he requested the ITO, Ward 4(2), Patna to transfer the case to Ghaziabad with whom his jurisdiction fell for assessment year 2011-12. Thus, the case was transferred by ITO, Ward-4(2), Patna which was received in the office of the DCIT, Circle-1, Ghaziabad on 08.11.2012. Notice u/s. 142(1) of the I.T. Act, 1961 alongwith questionnaire dated 8.7.2013 and 20.9.2013 were issued to the assessee. In response to the same, Assessee’s A.R. attended the proceedings from time to time and produced some of the details. Thereafter, the AO vide his order dated 28.3.2014 passed u/s. 143(3) of the I.T. Act, 1961 has computed the income of the assessee at Rs. 43,34,060/- and made the various additions.
Aggrieved with the aforesaid order dated 28.3.2014, assessee filed the Appeal before the Ld. CIT(A), who impugned order dated 22.10.2015 has dismissed the appeal of the assessee.
Against the aforesaid order dated 22.10.2015 passed by the Ld. CIT(A), assessee is in appeal before the Tribunal.
At the time of hearing ld. Counsel of the assessee has only argued the ground no. 2 i.e. legal ground in which he has stated that ld. CIT(A) has erred both law and facts in sustaining the initiation of proceedings u/s. 143(2) of the I.T. Act, 1961 and further completion of the assessment u/s. 143(3) of the Act without satisfying the statutory provisions for initiation of proceedings and completion of assessment under the Act. He further stated that the assessment order dated 28.3.2014 passed by the AO is without jurisdiction and is liable to be quashed because the jurisdictional AO has not issued any notice u/s. 143(2) of the Act and served. Therefore, the proceedings initiated are illegal, unsustainable and untenable under the law. He further stated that on 23.8.2012 the ITO, Ward 4(2), Patna has issued notice u/s. 143(2) of the Act wherein vide reply dated 03.9.2012, the assessee requested for transfer the case to Ghaziabad wherein the jurisdiction of the Assessee lies. Thereafter no notice u/s. 143(2) of the I.T. Act, 1961 was issued by the Jurisdictional AO/DCIT, Ghaziabad and as such the assessment was framed by the DCIT, Ghaziabad vide order dated 28.3.2014 at the total income of Rs. 43,34,060/- against the declared income of Rs. 17,54,060/- by making various additions in the assessment order. Assessee has raised additional ground before the Ld. CIT(A) for issuance of notice u/s. 143(2) of the Act by the Officer having jurisdiction over the assessee as stipulated under the Act. But Ld. CIT(A) has wrongly decided the same without applying his mind against the assessee. He further stated that AO has not given any opportunity to the assessee as required under section 127 of the I.T. Act for transferring the case of the assessee. He further stated that the notice issued by the AO/ITO, Patna is without jurisdiction and assessment so framed in pursuance thereto should be quashed as such. In support of this contention he relied upon the following cases:-
- CIT & Anr. Vs. Mukesh Kumar Aggarwal (Allahabad High Court) as reported in 345 ITR 29 - CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) reported in 346 ITR 67 - CIT vs. Cebon India Ltd. (Punjab & Haryana High Court) reported in 347 ITR 583 - CIT vs. Vishnu & Co. P Ltd. (Delhi High Court) reported in 319 ITR 151 - CIT vs. Bhan Textiles (P) Ltd. (Delhi High Court) reported in 287 ITR 287 - Madan Singh Kangarot vs. ITO (ITAT Jaipur Bench) reported in 145 TTH 262 - Dr. KC Verma vs. ACIT (ITAT, Delhi Bench) reported in 84 ITD 33.
- Raj Kumar Chawla vs. ITO (Delhi ITAT Special Bench) reported in 94 ITD 1
On the other hand, Ld. DR relied upon the order passed by the revenue authorities and stated that the assessee has joined the proceedings before the AO. Therefore, there is no need to issue fresh notice u/s. 143(2) of the I.T. Act. He further stated that the case of the assesee has been transferred on the request of the assessee, hence, there is no need to provide any opportunity to the assessee and the assessment in dispute has rightly been framed by the AO on the issue of notice u/s. 143(2) of the I.T. Act issued by the ITO, Patna.
I have heard both the parties and perused the relevant records especially the order passed by the Revenue Authorities. I find considerable cogency in the assessee’s counsel submissions that the assessment order dated 28.3.2014 passed by the AO is without jurisdiction and is liable to be quashed because the jurisdictional AO has not issued and served any notice u/s. 143(2) of the Act. Therefore, the assessment proceedings initiated are illegal, unsustainable and untenable under the law. I find that in this case on 23.8.2012 the ITO, Ward 4(2), Patna had issued notice u/s. 143(2) of the Act wherein, vide reply dated 03.9.2012, the assessee requested for transfer the case to Ghaziabad wherein the jurisdiction of the Assessee lies. After going through the order passed by the revenue authorities, I am of the considered view that no notice u/s. 143(2) of the I.T. Act, 1961 was issued by the Jurisdictional AO i.e. DCIT, Circle-1, Ghaziabad who has completed the assessment. I have also perused the copy of the ITR (AY 2010-11) filed in which the address of the assessee is mentioned as “C-4104, Gaur Green City, Vaibhav Khand Indirapura, Ghaziabad, U.P.-201010” and the assessment was also completed by the Assessee’s Jurisdictional AO i.e. DCIT, Circle, Ghaziabad. Hence, the assessment so framed by the AO is totally illegal and needs to be quashed. My view is fully supported by the following judgment of the Hon’ble High Courts, Special Benches decision of the ITAT and the Coordinate Benches of the ITAT.
- CIT & Anr. Vs. Mukesh Kumar Aggarwal (Allahabad High CIT & Anr. Vs. Mukesh Kumar Aggarwal (Allahabad High CIT & Anr. Vs. Mukesh CIT & Anr. Vs. Mukesh Kumar Aggarwal (Allahabad High Kumar Aggarwal (Allahabad High Court) as reported in 345 ITR 29 Court) as reported in 345 ITR 29 Court) as reported in 345 ITR 29 Court) as reported in 345 ITR 29
Section 292BB is a rule of evidence, which validates the notice in certain circumstances. The newly inserted section 292BB provides that where an assessee has as appeared in any proceedings or so operated in any inquiry relating to assessment or reassessment, it shall deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with lie provisions of this Act and such assessee shall be precluded from taking any objection in any proceedings or inquiry under the Act that the notice was not served upon him or not served upon him in time or served upon him in an improper manner. In the present case, the Tribunal has returned the findings that the notice under section 143(2) of the Act was admittedly not issued in this case. The assessing authority thus did not have jurisdiction to proceed further and make assessment. We do not find that the non-consideration of section 292BB, which is rule of evidence, and a deeming provision to validate the notice in certain circumstances, will have any effect on the judgment in Hotel Blue Moon [2010] 321 ITR 362 (sq. It was held in Hotel Blue Moon's case [2010] 321 ITR 362 (Sqtmt the very foundation of the jurisdiction of the Assessing Officer is on the issuance of the notice under section 143(2). The income-tax appeal is dismissed.” - CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) CIT & Anr. Vs. Bihari Lal Agrawal (Allahabad High Court) reported in 346 ITR 67 reported in 346 ITR 67 reported in 346 ITR 67 reported in 346 ITR 67
We also may mention here that the question of section 292BB of the Act pressed into service by the Revenue herein came up for consideration before this court in Income Tax Appeal No.286 of 20 11, decided on November 23, 2011 (ClT v. Mukesh Kumar Agrawal since reported in [2012l 345 8
ITR 29 (All)) and this court has held that the proviso to section 292BB is not applicable in a case where the authority did not have jurisdiction to proceed further and male assessment. - CIT vs. Cebon India Ltd. (Punjab & Haryana High Court) CIT vs. Cebon India Ltd. (Punjab & Haryana H igh Court) CIT vs. Cebon India Ltd. (Punjab & Haryana H CIT vs. Cebon India Ltd. (Punjab & Haryana H igh Court) igh Court) reported in 347 ITR 583 reported in 347 ITR 583 reported in 347 ITR 583 reported in 347 ITR 583
Section 292BB of the Income-tax Act, 1961 - Notice deemed to be valid in certain circumstances - Assessment year 1996- 97 - Whether absence of notice can ~ be held to be curable under section 292BB - Held, no Section 143, read with section 292BB, of the Income-tax Act, 1961 - Assessment - Issue of notice - Assessment year 1996- 97 - Assessee filed return for assessment year-in-question on 30.11.1996, which was processed under section 143(l)(a) on 30-5-1997 - Thereafter, assessment was framed under section 144 - On appeal, Commissioner (Appeals) held that there was no evidence to show that notice under section 143(2) had been served on assessee before 30-11-1997, i.e., within one year of filing of return and, accordingly, treated assessment was void - Tribunal upheld finding of Commissioner (Appeals) - Revenue submitted that a notice had been duly dispatched to assessee on 13-11-1997 and irregularity or defect in issuing notice was curable under section 292BB - Whether since notice was not served within stipulated time, mere giving of dispatch number would not cure said defect – Held, yes - Whether, therefore, assessment was rightly treated as void - Held, yes - CIT vs. Vishnu & Co. P Ltd. (Delhi High Court) reported in 319 CIT vs. Vishnu & Co. P Ltd. (Delhi High Court) reported in 3 CIT vs. Vishnu & Co. P Ltd. (Delhi High Court) reported in 3 CIT vs. Vishnu & Co. P Ltd. (Delhi High Court) reported in 3 19 19 19 ITR 151 ITR 151 ITR 151 ITR 151
Section 143 of the Income-tax Act, 1961 - Assessment Issue of notice Assessment year 200] -02 – Whether section 143(2) is a mandatory provision looking at it from standpoint of a regular assessment or from standpoint of an assessment under Chapter XIV -B – Held. - CIT vs. Bhan Textiles (P) Ltd. (Delhi High Court) reported in CIT vs. Bhan Textiles (P) Ltd. (Delhi High Court) reported in CIT vs. Bhan Textiles (P) Ltd. (Delhi High Court) reported in CIT vs. Bhan Textiles (P) Ltd. (Delhi High Court) reported in 287 ITR 287 287 ITR 287 287 ITR 287 287 ITR 287
The assessee had filed the return on November 20, 1996, and, therefore, the stipulated under the proviso to section 143 (2) (ii) for service of notice expired on November 30, 1997. The said proviso leaves no room for debate that the notice must be served on the assessee. In CIT v. Lunar Diamonds Ltd. [2006] 281 ITR 1 (Delhi) the Division Bench had rejected the contention that the words “served" and "issued" are synonymous and are interchangeable. The Bench did not have the benefit of the decision of the Supreme Court In R. K. Upadhyaya v. Shanabhai P. Patel [1987] 166 ITR 163, which in fact strengthens and fortifies the position that there is a clear distinction between "issuance of notice" and "service of notice". Ms. Bansal's reliance on Tea Consultancy and Services (India) P. Ltd. v. India [2005] 278 ITR 356 (Delhi) is of no avail since the word that had to be construed by the Division Bench in that case was "made" and not "issued" or "served". We see no reason to adopt an approach different to the one adopted by us in CIT v. Vardhman Estate P. Ltd. [2006] 287 ITR 368 (Delhi) (I. T. A. No. 1248 of 2006) decided by us on September 25, 2006. - Madan Singh Kangarot vs. ITO (ITAT Jaipur Bench) Madan Singh Kangarot vs. ITO (ITAT Jaipur Bench) Madan Singh Kangarot vs. ITO (ITAT Jaipur Bench) Madan Singh Kangarot vs. ITO (ITAT Jaipur Bench) reported in 145 TTH 262 reported in 145 TTH 262 reported in 145 TTH 262 reported in 145 TTH 262 Section 142, read with sections 139, 143 and 144, of the Income-tax Act, 1961 – Assessment - Inquiry' before assessment - Assessment year 2007-08 - Whether where return has been furnished by assessee under section 139 or in response to notice issued under section 142(1)(i), notice under section 143(2) is to be 10 issued within a period of six months from end of financial year in which return has been filed - Held, yes Whether where Assessing Officer has not issued notice under section 143(2) within time available, he cannot issue notice under section 142(1 )(ii) and (iii) after time limit of issuance of notice under section 143(2) has expired - Held, yes - Dr. KC Verma vs. ACIT (ITAT, Delhi Bench) reported in 84 ITD Dr. KC Verma vs. ACIT (ITAT, Delhi Bench) reported in 84 ITD Dr. KC Verma vs. ACIT (ITAT, Delhi Bench) reported in 84 ITD Dr. KC Verma vs. ACIT (ITAT, Delhi Bench) reported in 84 ITD 33. 33. 33. 33.
The enquiry u/s. 142(1) could be issued only once the AO had validly assumed jurisdiction to make assessment or was able to assume jurisdiction validly after making enquiry u/s. 142( 1). On the loss of power to assess due to the expiry of the limitation period, the notice u/s. 142(1) could not be issued. - Raj Kumar Chawla vs. ITO (Delhi ITAT Special Bench) Raj Kumar Chawla vs. ITO (Delhi ITAT Special Bench) Raj Kumar Chawla vs. ITO (Delhi ITAT Special Bench) Raj Kumar Chawla vs. ITO (Delhi ITAT Special Bench) reported in 94 ITD 1 reported in 94 ITD 1 reported in 94 ITD 1 reported in 94 ITD 1
Section 143(2), read with section 48, of the Income-tax Act, 196] - Assessment - Notice of - Assessment year 1995-96 - Whether return filed pursuant to notice under section 148 must be assumed and treated to be return filed under section 139 and assessment must thereafter be made under section 143 or 144 after complying with mandatory provisions - Held, yes Whether, therefore, proviso to section 143(2) which mandates service of notice 12 months from end of month in return is filed, also applies to returns filed pursuant to notice under 148 and it is incumbent upon assessing authority to issue notice under section 143(2) within period as stipulated in proviso to section 143(2) in respect of return filed pursuant to notice under section 148 - Held, yes Whether no assessment can be made if notice under section 143(2) is not served within period prescribed by proviso under section 143(2) and, thus, return filed will be deemed as accepted - Held, yes
In the background of the aforesaid discussions and respectfully following the precedents as aforesaid, I am of the considered view that the Jurisdictional AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee, hence, the assessment order in dispute is invalid, void abnitio and against the provisions of the law and is not sustainable in the eyes of law. Therefore, the assessment order as well as the appellate order stand cancelled and appeal of the assessee stands allowed.
In the result, the appeal of the Assessee is allowed.
Order pronounced in the Open Court on 09/01/2017.