M/S CREATIVE WORLD TELEFILMS LTD.,MUMBAI vs. DY. CIT CENTRAL CIRCLE-6(4), MUMBAI

आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 17/12/2018 passed by CIT (A)-54, Mumbai for the quantum of assessment passed u/s.144 r.w.s. 147 for the A.Y.2010-11.

2 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd 2. In the original grounds of appeal, assessee has raised following grounds:- “1. The Ld. Commissioner of Income Tax (Appeals) erred in holding that the assessment was validly reopened by issuing of Notice u/s 148 of the Act. 2. The Ld. Commissioner of Income Tax (Appeals) erred in passing the order without giving proper opportunity to the appellant. 3. The Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 18,16,58,398/- in respect of all deposits in bank account u/s 68 being unexplained cash credits. Your appellant, therefore, submits that the Hon. Tribunal may be pleased to hold that the assessment order under appeal is void and illegal and the same be annulled.”

3 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd 4. The Ld. AO has erred in issue of notice under sec. 148 without there being any tangible material evidence on record(s) which justified the recording of satisfaction that income had escaped assessment except for the information from the DDIT (Inv). 5. The Ld. AO has erred in obtaining the sanction for issue of the notice under sec. 151 from the Pr. CIT - Central Circle 3, Mumbai in a mechanical manner which merely stated "Yes, I am satisfied. It is fit case for issue of Notice u/s 148" in less than 24 hours which conclusively proved that the sanction was received without proper application of mind from both the Pr. CIT & the JCIT. 6. The Ld. CIT(A) has erred in passing the order without giving the appellants submission due consideration and by placing too much reliance on "Issue" without dwelling on "Service" of the notice for re-opening. The verbs "Issue" and "Service" have different meaning(s) and connotations and cannot be equated to one another or be treated as synonyms. The notice(s) issued by the Ld. AO have not gone out of his hands before the limitation period either by e-mail and/or post.

4 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd “Information was received in the office of DDIT (nu), Unit-7(4) that there are 34 related accounts, in which the following accounts have huge transactions: (i) Kailash Enterprises: Numerous high value RTGS/Clearing cheques credited in the account, followed by transfers to various company/individual accounts maintained with the bank or other bank through RTGS/Clearing Total operation is aggregating to Rs. 2 crores approx within a span of 8 months (ii) Abinav Traders: High value transfer transactions/RTGS transactions debited/credited in the account. Total operation is aggregating to Rs.7 crores approx within a span of 14 months. Both these accounts are recently closed. Complex transfer transactions between groups of accounts (including both these accounts) were seen with no economic rationale. The inflow of funds are through RTGS/Clearing/cash in any of these accounts, funds are then rotated/transferred within these group accounts, finally the funds are moved out through RTGS/Clearing/Demat/Pay order on the same day. Customer is in the business of trading of iron and steel. The customer does not visit the branch and all transactions were executed by his representative Most of these accounts are operated by common directors/proprietors ie. Mukesh Maniklal Choksi, Jayesh Krishnaraj Sampat, Rakesh Hansh Mehta, Jitendra C Singh and Milan Shantilal Mehta. The group is into different businesses Le. Construction, Software, Telefilms, Synthetics, Textiles, Steel, Securities etc Enquiry with the bank After obtaining approval from the Addl. DIT (Inv), Unit 7 Mumbai, the bank account statement of the assessee was called for from the respective bank. The details received from the bank were carefully perused by DDIT (Inv), Unit 7(4), Mumbai. The total amount of debits & deposits/credits in bank account of the assessee during FY 2009-10 (A.Y. 2010-11) are as under:-

5 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd Sr. Bank Account Name of the PAN Total Total No Details Number account amount amount . holder debited credited

Axis Bank 180102000 Creative AAACL1812G 17,89,64,440 18,16,58,398/ Ltd, 17620 World /- - Borivali (W) Telefilms Mumbai Limited Enquiry with the assessee (M/s. Creative World Teleflüms Limited): A summon u/s 131 of the income Tax Act, 1961 was issued u/s 131 of the income Tax Act, 1961 to the assessee to furnish the explanation in respect of source of amount credited/deposited in his bank account during FY 2009-10 (A.Y 2010-11) alongwith documentary evidence In response to the summons issued u/s. 131 of the income Tax Act, 1961, the assessee did not comply with the summon. The assessee was given sufficient opportunities to furnish explanation in respect of source of amount credited in his bank account during FY 2009-10 (AY 2010-11) along with documentary evidences. The assessee didn't furnish any explanation alongwith documentary evidence in respect of amount credited in his bank accounts in absence of any explanation with documentary evidence, the following amount has to be taxed in the hand of the assessee in the assessment year 2010-11 In view of the above and after considering the returns of income filed by the assessee, I have reason to believe that substantial incomes (specified as above) chargeable to tax have escaped assessment for Assessment Years 2010-11 in terms of section 147 of the IT Act. Further, with reference to first proviso to section 147 of the IT Act, there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Accordingly, notice u/s 148 of the IT Act, 1961, for AY 2010-11, is issued for the purpose of reassessment."

6 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd 6. Thus, assessment was reopened on the basis of information received from DDIT (Investigation) and there were debits and credits entries in the account of the assessee from dubious entities unearthed from investigation and inquiry carried out by the Department. Before reasons were recorded assessee was summoned to explain the deposit in the bank account and opportunity was given to substantiate which assessee did not comply nor assessee furnished any explanation in respect of source of deposits of the amounts. Thereafter, a notice u/s. 143(2) was issued on 29/08/2017 and in response, assessee has raised objections, reopening of the assessment which is as under:- “With reference to the above we would like to bring to your kind notice that the above notice is time barred as per section 148 of the Act, 1961. As per the section, the notice for assessment should be communicated to the assessee on or before completion of 4 years from the end of the assessment year and in case where the assessing officer has reasons to believe that income escaping assessment is more than Rs. 1,00,000/- then on or before completion of 6 years from the end of the assessment year. Hence, the last date for communication of notice for assessment will be 31.03.2017 Hence, in lieu of the above, we would like to inform that we have not received any physical copy of the notice. Also, the one received electronically was dispatched by you on 01.04.2017 as per the annexure attached. Hence, we have reasons to believe that the assessment has become time barred. Please note the above and in case of any discrepancy kindly give us an opportunity of being heard." 7. Thus, the main objection of the assessee was that notice u/s.148 was communicated after the expiry of limit provided u/s.149, i.e., after 31st March 2017. The ld. AO while disposing

7 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd of the objection vide letter dated 07/11/2017 had stated as under:- “The notice for reopening your assessment u/s 148 of the IT Act for AY 2010-11 was dispatched by Speed Post on 31 03 2017 at your registered office address. A copy of the same notice was generated on ITBA on 31 03 2017 and was sent to you electronically Thus, the reopening of assessment was done within the tune limits as per the IT Act. Thus, the objection raised by you to the reopening of assessment is being treated as disposed"

8 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd on 31/03/2017. Further, notice was also sent and generated by ITBA on 31/03/2017 which was sent electronically. The ld. CIT(A) acknowledged that assessee received the notices by e-mail at 1:02 AM on 1st April stating that it has enough evidence to prove that notice has been issued in time. 10. In so far as merits are concerned, even before the ld. CIT(A), assessee could not substantiate or furnish any explanation with regard to the deposits of huge amount in its bank account. Accordingly, ld. CIT(A) has confirmed the said additions. His relevant finding at para 6.1 on merits is as under:- “6.1 During the course of appellate proceedings, when the case was posted for hearing, the assessee filed submissions which were only with regard to issue of notice u/s. 148. The assessee merely requested to quash the assessment order but had not made any submissions on the merits of the addition made. When the assessee had filed an appeal aggrieved with the addition of Rs. 18,16,58,398/-, it is for him to explain and argue why such addition should not be made in the assessee's hands But strangely, the assessee has been silent throughout. No kind of explanation was given to the DDIT (Inv.) or to the AO or during the appellate proceedings. Therefore, it is presumed that the assessee has nothing to offer in its defense and was mischievously trying to get relief on a technical ground. As it is an undisputed fact that there are credits to the tune of Rs. 18,16,58,398/- in the bank account of the assessee and the assessee had failed to explain the source of the same, the same has rightly been treated as income of the assessee for the relevant AY. The addition made by the AO is upheld. This ground of appeal is DISMISSED. 11. Now, before us the ld. Counsel has raised multiple legal issues taken by way of additional ground. The first ground which has been raised that ld. AO has not issued the statutory notice

9 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd for informing the change in the incumbency u/s.129 and validity of jurisdiction of the AO under sections 120, 124 & 127 as raised in ground No. 1 & 2. Here in this case, original assessment order was passed by DCIT-Central Circle-39, Mumbai. The proceedings u/s.148 and final re-assessment order dated 21/12/2017 has been passed by DCIT, Central Circle-6(4), Mumbai. In response to the RTI application filed by the assessee it has been informed that Central Circle-39 after restructuring was re-named as Central Circle-6(4) and there was no change of jurisdiction in the case of the assessee. Copy of relevant cadre restructuring has also been enclosed to state that the original change of jurisdiction Central Circle-39 after restructuring was re-named as Central Circle-6(4) and hence, there was no change of the jurisdiction of the assessee. Later on, the assessee‟s case was decentralized vide order passed u/s.127 by PCIT-Central-3 Mumbai to ITO Ward 12(1)(1), Mumbai on 06/07/2020. The copy of PAN history has also been given by the department before us stating that Central Circle-6(4), Mumbai had jurisdiction till 28/11/2020 and later on it was transferred to ward -12(1)(1), Mumbai. Copy of order u/s.127 dated 06/07/2020 has also been filed before us. Thus, at the time of issuance of notice u/s. 148 and passing of the reassessment order, the jurisdiction lied with Central Circle-6(4), Mumbai only and hence it cannot held that AO lacked jurisdiction or there is any violation of section 120 or Section 124 or Section 127. We do not find any substance and basis for challenging the jurisdiction of the ld. AO by the assessee when the AO who had issued notice u/s.148 and has

10 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd passed assessment order had the original jurisdiction upon the assessee. Moreover, assessee had not raised this objection before the ld. AO that he did not have proper jurisdiction which he should have in terms of section 124(3). In so far as ground lack of issuance of notice u/s.129, is also ill-conceived, because there is no change of incumbent. Accordingly, the grounds No. 1 & 2 as raised by the assessee are dismissed. 12. Now coming to the legal issue whether the notice issued u/s.148 is within time limit prescribed u/s 149, i.e., whether notice has been issued on or before 31/03/2017 or post 31/03/2017. Before us, ld. Counsel has taken a plea that, notice u/s.148 was received only through e-mail on 01/04/2017 and hence, the whole proceedings are invalid, being beyond time limit. Before us, assessment records were produced and the ld. CIT DR has filed various evidences to show that the notice u/s.148 was issued on 31/03/2017, after recording the reasons in writing and obtaining the approval from PCIT Central Circle-3, Mumbai who was the competent authority u/s.151. The notice dated 31/03/2017 was dispatched through speed post on 31/03/2017 on the registered and official address of the assessee. The ld. DR had filed Journal of speed post from the Department of Post that notice was issued to the assessee, „M/s. Creative World Telefilms Ltd.‟ on 31/03/2017 with EM Speed Post No.EM972396308IN. The photo copy of registered post sent to the assessee had also been filed. From the perusal of the copy of envelope it is seen that postal authorities had mentioned „left‟.

11 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd Thereafter, Bench vide order sheet entry dated 06/07/2022 had raised following query to the ld. AR. “Before us Ld. AR appearing on behalf of the assessee submitted that here in this case, notice u/s 148 was issued on 31st March 2017, which as per him, had not been served upon the assessee. A report was called from the AO and vide letter dated 21 September 2021, it has been submitted that notice u/s 148 issued on 31st March 2017 was sent through Speed Post on the same official registered address and simultaneously issued notice through ITD system. AO has enclosed the copy of notice dated 31st March 2017 alongwith speed post acknowledgement, which is written as sent on 31st March 2017. A notice has been sent to the registered address which reads as under:- To, M/s Creative World Telefilms Ltd, 808, Aura Biplex, Above Kalyan Jewellers, S. V. Road, Mumbai-400 092." The said envelop mentions date 31st March 2017, however the postal authority vide noting dated 05.04.17 have put remark Left'. Another notice through ITD dated 31st March 2017 which Ld. AR submitted that the same was issued on 1st April 2017. Further, it is seen from the record that the notice sent through speed post from the office of ITAT on the same address, there is a similar remark 'Left' and there is no one to receive the notice on that address. Under these facts, we direct the AO to conduct the enquiry as to whether there is any working office on the same address and any business activity carried on with any staff and infrastructure. Assessee is also required to explain that if the notice has been sent through registered post at a registered address which as per the assessee is the correct address, and if either no one is found at the address or it is closed, then why an alternative communication address has not been provided and why it should not be considered as deemed service of notice. The assessee should also file an affidavit whether any notice u/s 148 or any other notice thereon has been served upon him at any point of time.

12 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd AO is directed to submit the report within one month from the date of this order. The Appeal is fixed for hearing on 22nd August, 2022. Copy of this order is provided to both the parties.

13 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd 31/08/2017 to 31/03/2017. This allegation is divorced from the records submitted before us; firstly, the speed post journal maintained by the department mentions 31/03/2017, secondly, the Assessing Officer as well as ld. CIT (A) on the basis of record have given a finding that the date of issuance of notice was on 31/03/2017; and lastly, the envelope itself mentions 31/03/2017, the date on which speed post was sent. It is not the date generated by the department or forged the envelope. Such an allegation by the ld. Counsel is abhorred. 15. Now coming to the issue, whether it is sufficient if the notice has been issued and sent on the last date of limitation or it has to be served also within the time limit prescribed u/s.149, i.e. within six years from the end of the relevant assessment year. The statute clearly provides that the notice has to be issued. The word used in Section 149 is that, “no notice under section 148 shall be issued for the relevant assessment year -…………..” The time limit has to be seen from the date of issuance of notice and not from the date of service of notice. It is only when notice has been served upon the assessee in accordance with law, then AO can assume jurisdiction to pass the assessment order. However, in so far as time limit is concerned u/s.149, the main condition provided is that notice u/s.148 should be issued and that necessary proof has to be given that it was issued within the time limit. Here in this case, the records which have been produced before us clearly says that the notice u/s.148 was issued and sent through speed post on the registered office and the address mentioned by the assessee

14 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd on 31st March 2017 which was the date post when limitation ends. The Hon‟ble Supreme Court in the case of R.K. Upadhyaya vs. Shanabhai P Patel (1987) 166 ITR 163 has held that service of notice u/s.148 is not a condition precedent to conferment of jurisdiction of the ITO but it is a condition precedent for making of the order of the assessment. The relevant observation of the Hon‟ble Apex Court reads as under:- 4. Section 34, conferred jurisdiction on the ITO to reopen an assessment subject to service of notice within the prescribed period. Therefore, service of notice within limitation was the foundations of jurisdiction. The same view has been taken by this Court in J.P. Jani, ITO v. Induprasad Devshanker Bhatt [1969] 72 ITR 595 as also in CIT v. Robert J. Sas [1963] 48 ITR 177. The High Court, in our opinion went wrong in relying upon the ratio of Banarsi Debi's case (supra) in disposing of the case in hand. The scheme of the 1961 Act so far as notice for reassessment is concerned, is quite different. What used to be contained in section 34 of the 1922 Act has been spread out into three sections, being sections 147, 148 and 149. A clear distinction has been made out between 'issue of notice' and 'service of notice' under the 1961 Act. Section 149 prescribes the period of limitation. It categorically prescribes that no notice under section 148 shall be issued after the prescribed limitation has lapsed. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitations, jurisdiction becomes vested in the ITO to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly, the notice was issued within the prescribed period of limitation as 31-3-1970, was the last day of that period. Service under the 1961 Act is not a condition precedent to conferment of jurisdiction in the ITO to deal with the matter but it is a condition precedent to making of the order of assessment. The High Court in our opinion lost sight of the distinction and under a wrong basis felt bound by the judgment in Banarsi Debi's case (supra). As

15 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd the ITO had issued notice within limitations, the appeal is allowed and the order of the High Court is vacated. The ITO shall now proceed to complete the assessment after complying with the requirements of law. Since there has been no appearance on behalf of the respondents, we make no orders for costs. Thus, in the present case the notice has been issued within the time limit prescribed u/s.149 and therefore, the ground and the objection raised by the assessee is dismissed. 16. Further, if notice has been issued on the registered address or the address which has been communicated by the assessee to the department and if the same has been sent through registered post or speed post, then in so far as the onus cast upon the AO to send the notice stands discharged. The procedure for service by post is given in Section 27 of the General Clauses Act, 1897 which reads as under :- “Meaning of service by post :- Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression serve or either of the expressions give or send or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. Ergo, the requirements for valid service by post as per aforesaid section 27 of the General Clauses Act, 1897 are:-

16 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd i. Proper addressing; ii. Prepaying; iii. Sending by registered post with acknowledgment due.”

Thus, if the notice has been sent through post with proper address, sent by Registered post with acknowledgement, then the presumption is that delivery of the assessee has been affected. However, here in this case as noted above, the notice sent through speed post returned back with the remark “left”. Even if it is held that notice issued on 31/03/2017 sent through speed post has not been received because postal authority has stated that assessee „left the premise‟, then in so far as issue of limitation is concerned which is to be reckoned from the date of issue is valid.

Now, coming to the issue of service of notice, the assessee continuously has been claiming that the registered /official address on which notice has been sent or which has been mentioned in its return of income in another communication with the correct address and continues to be the same, then the efforts should have been made by the department to serve the notice through affixture which is no more prescribed under the CPC order (v). Now, here in this case the notice sent through speed post may not have been served upon the assessee as it was not found on its registered / official address, then here in this case it has also been brought on record that notices were also sent through ITBA portal on 31/03/2017 and by email

17 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd which mail assessee received post 12 AM (i.e., 1:02 AM) on 01/04/2017. Even if it is presumed email has been sent post 12 AM, however, the fact of the matter is that once, notice has been issued within time and even if assessee has received the notice on the next date i.e. on 1/04/2017 by electronic media or email which is valid mode of service of notice u/s 282 and 282A, then it is valid service of notice. Accordingly, there is no infirmity in assumption of jurisdiction to pass the reassessment order by the AO. Here the case of the assessee is that notice has been issued post 31st March 2017, which fact we have already discussed and dismissed the assessee‟s objection. Thus, it cannot be said that the initiation of proceedings u/s.148 r.w.s. 149 is bad in law. Accordingly, this ground raised by the assessee is rejected.

18 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd has failed to comply with. Under these circumstances the information and inquiry does constitute a tangible material having direct live link nexus that deposits are unexplained and income chargeable to tax has escaped assessment. Thus, it cannot be held that the there was no prima facie belief by the AO that income chargeable to tax has escapement assessment. If reasons are otherwise sustainable in law and the competent authority has given his approval that he is satisfied on such reasons recorded which are based on relevant material indicating escapement of income, then it is sufficient compliance of law u/s. 151. As long as reasons recorded and reason to believe is sustainable, then it is not necessary that the approving authority has to again give his detailed reasons for approving reasons recorded. Thus, approval given by the Ld. PCIT Central Circle-3, Mumbai u/s 151 is in accordance with law and consequently, the ground taken by the ld. Counsel is rejected. 18. In so far as merits are concerned, no arguments have been placed by the ld. Counsel and he fairly admitted that no explanation or evidences have been provided by the assessee to explain the deposits or source of deposits or whereabouts of the dubious companies from where money has come before the ld. AO or ld. CIT (A). Even at this stage of second appeal nothing has been filed or explained about the deposits, except for raising various legal issues and grounds which we have rejected. Accordingly, the addition of Rs.18,16,58,398/- made by the AO is confirmed as we do not find any infirmity in the order of the ld. AO and ld. CIT(A) in confirming the addition of

19 ITA No.1651/Mum/2019 M/s. Creative World Telefilms Ltd Accordingly, all the grounds raised by the assessee are dismissed. 19. In the result, appeal of the assessee is dismissed. Order pronounced on 3rd Jan, 2024.

Sd/- Sd/- (AMARJIT SINGH) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 03/01/2024 KARUNA, sr.ps

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//

BY ORDER,

(Asstt. Registrar) ITAT, Mumbai