VISHNU KUMAR,BHARATPUR vs. ACIT OR JCIT OR DCIT OR ASST. CIT OR ITO, NATIONAL FACELESS ASSESSMENT CENTRE, BHARATPUR

On the other hand, ld. DR for the Department has referred to the proceedings conducted by the Assessing Officer from the beginning, to point out that the assessee filed return only on 19.11.2021 i.e. after much delay, and that for the reasons recorded by the Assessing Officer, he was justified in holding the ITR filed in response to the notice under section 148 of the Act, to be an invalid return. As regards the contention raised on behalf of the appellant that the reasons for reopening of the matter were not communicated to the assessee at the earliest, Learned DR has submitted that it was explained to the assessee that only after filing of his return reasons for reopening of the Sh. Vishnu Kumar matter would be communicated to him, and that in this regard there was no illegality or irregularity committed by the Department. We have gone through the decisions relied on by learned AR for the assessee to appreciate the respective contentions raised before us. Narration of facts in brief The assessee is a proprietor of proprietorship concern- M/s Shri Ramesh Industries. He is also a director in company namely M/s Sunny Real Construction Pvt. Ltd., having 40% share in the said company. He is also a partner in M/s S.V.M. Oil Industries. As claimed by the department, the assessee, had provided unsecured loan to the abovesaid company for purchasing of an immovable property of Rs. 3,79,16,890/-. In regard to the source of amount advanced to M/s Sunny Real Construction Pvt. Ltd. and to examine the creditworthiness of Directors and genuineness of the transactions, assessee replied in response to the notice u/s 133(6) of the Act that the amount advanced was given out of capital withdrawn from his partnership firm. M/s SVM oil industries. Bank statement of M/s SVM oil Industries was filed from which amount of loan Sh. Vishnu Kumar was found to be have been advanced to M/s Sunny Real Construction Pvt. Ltd. All the payments were made through banking channel. As further claimed by the department, total turnover of the M/s SVM oil Industries was Rs. 96,46,88,637/- and 81,74,25,829/- for FY 2014-15 and 2015-16 respectively. Further, on perusal of Books of M/s SVM Oil Industries, it was found that amount which was paid to M/s Sunny Real Construction was shown as capital withdrawn by Sh. Vishnu Kumar. But, it was also found form the partner's capital account in the books of M/s SVM oil Industries that sh. Vishnu Kumar had introduced capital of Rs. 3,79,16,890/- during the FY 2014-15 and Rs. 3.53,51,196/- during the FY 2015-16. There were no respective withdrawal from the proprietorship concern of Sh. Vishnu Kumar. Thus, capital introduced by Sh. Vishnu Kumar in his partnership concern M/s SVM Oil Industries at the tune of Rs. 3,79,16,890/- during the FY 2014-15 and Rs. 3,53,51,196/- during FY 2015-16 was not collaborative with the income particulars of Sh. Vishnu Kumar. As further claimed by the department, in the Reasons communicated to the assessee, amount of capital introduced in M/s SVM Oil Industries during AY 2015-16 was found un- explained.

No doubt, the assessee exceeded the stipulated time in filing of return in response to the notice under section 148 of the Act. But, for that he had sufficient reasons. Admittedly, it was Covid-pandemic period. Vide Circular dated 30.04.2021, CBDT extended the time line for furnishing of return in response, to the notice u/s 148 of the Act. Said instructions were issued in view of said severe pandemic, which had cruelly attacked the human beings. Secondly, the assessee had requested for supply of Reasons for reopening of the matter, but those were not made available to the assessee. He was informed by the department only on 16.11.2021 that Reasons will be provided after he files return of income in response to Sh. Vishnu Kumar notice under section 148 of the Act. Soon thereafter, the assessee came up with the return of income on 19.11.2021. Had the department informed the assessee prior to 16.11.2021 that Reasons would be provided after he files return of income, the assessee might have furnished the return of income even earlier. As regards non supply of copy of approval under section 151 of the Act, suffice it to state that after the supply of Reasons for reopening, the assessee never lodged any protest with or asked the Assessing Officer for copy of such approval. In Saraswati Garewal’s case, (2024) 158 taxmann.com 37 (Raipur) cited on behalf of the appellant, the assessee had specifically asked for copy of approval for issuance for notice under section 151 of the Act, but the department provided only copy of reasons, without the copy of approval under section 151. Therefore, said decision subsequently cited on behalf of the assessee is distinguishable, and does not come to the aid of the appellant. Conclusion 9. Therefore, we are of the view that the return filed by the assessee on 19.11.2021, in response to the said notice u/s 148 of the Act, should not have been held to be an invalid return.

Learned DR has referred to the findings recorded in para No. 5 of the impugned order by Learned CIT(A), to justify non issuance of any such notice to the assessee, and contended that non issuance of notice under section 143(2) does not adversely affect the case of the department. Discussion 14. As regards non issuance of notice u/s 143(2) of the Act, Assessing Officer is required to serve on the assessee such notice, calling upon him to produce or cause to be produced before him any evidence on which the assessee is to rely in support of the return already furnished u/s 139 of the Act, where the Assessing Officer considers it necessary or expedient to ensure that the assessee did not understate the income or did not compute excessive loss or did not underpay tax in any manner. This is a case where return was initially furnished u/s 139 of the Act.

Admittedly, notice under section 148 of the Act was issued to the assessee on 30.3.2021. It was followed by notice u/s 142(1) of the Act Sh. Vishnu Kumar issued to the assessee on 24.06.2021. No notice under section 143(2) was issued.

Learned CIT(A) held that since no valid return was filed by the assessee in response to the notice under section 148 of the Act, no notice under section 143(2) of the Act was required to be issued. With this finding, Learned CIT(A) upheld the view expressed by the Assessing Officer. But, as noticed above, we have held that the return filed by the assessee in reply to the notice under section 148 of the Act could not be held to be an invalid return. In view of said finding, the findings recorded by the authorities below, on this point, deserve to be set aside. Even otherwise, it is settled law that in case of assessment under Chapter XIV of the Act, a notice under section 143(2) of the Act is mandatory where the Assessing Officer proceeds to make an inquiry as provided under section 142.

In Alpine Electronics Asia Pte. Ltd. V. DGIT, (2012) 341 ITR 247(Delhi), it has been held that section 143(2) is applicable to proceedings under section 147 or 148 of the Act , and service of said notice under section 143(2) is mandatory in respect of returns filed pursuant to such notice. Without compliance with the mandatory requirement, a reassessment order cannot be passed. In other words, requirement of Sh. Vishnu Kumar issuance of such notice is a jurisdictional one. In this regard, reference may be made to decision in Principal CIT v. Paramount Biotech Industries Ltd., (2017) 398 ITR 701 (Delhi).

Nothing to the contrary has been cited on behalf of the Revenue.

As regards significance of such a notice, it may be mentioned here that section 143(2) incorporates the rule of audi alteram partem i.e., no man should be condemned unheard.

Without service of such a notice, right of the asessee would get affected, the reason being that it would prejudice his case if he is not afforded an opportunity to put forward his case in the proceedings. In this regard, reference may be made to decision in I.J.Rao, Asstt. Collector of Customs v. Bibhuti Bhushan Bagh, (1989) 3 SCC 202 (SC). Conclusion 21. In view of the above discussion, we hold that for want of service of notice under section 143(2) of the Act, the Assessing Officer had no jurisdiction to assume jurisdiction under section 143(2) of the Act. Sufficient time not provided to file objections to the Show Cause Notice & Draft Assessment Order 22. Another contention raised on behalf of the assessee is that after service of show cause notice & draft assessment order, upon the Sh. Vishnu Kumar assessee, he was not provided sufficient time to file objections thereto, and rather, the Assessing Officer hurriedly framed the assessment, and as such the assessment order deserved to be set aside.

At this stage, para 13 of the assessment order needs to be reproduced, and is reproduced for ready reference:- “13. A show cause notice along with Draft Assessment Order was issued to assessee on 27.03.2022. The assessee was requested to furnish his reply in response to the show cause notice. However, he failed to reply to the notice on the specified date. It clearly indicates that assessee has nothing to say in this regard.”

Admittedly, show cause notice accompanied by draft assessment order was issued to the assessee on 27.03.2022. Thereby, the assessee was asked to furnish his reply in response thereto, as is available from the last para of the said show cause notice. The assessee was required to submit his objection to the proposed variation by 23:59 on 28.03.2022. When the show cause notice appears to have been digitally signed at 16:09:39 IST on 27.03.2022, and he was given time upto 23.59 of 28.03.2022 to furnish reply or objections thereto, it can safely be said that sufficient opportunity was not granted by the Assessing Officer to the assessee, to respond to the said show cause notice or file objections thereto.

In support of his submissions, ld. AR for the assessee-appellant has relied upon the following decisions:-

On the other hand, while referring to the addition made as regard unexplained money to the tune of Rs. 3,79,16,890/- by the Assessing Officer, Ld. DR has submitted that the assessee failed to explain to the Assessing Officer the source of investment made by him, during the financial year 2014-15, to the tune of Rs. 3,79,16,890/-, i.e. from his proprietorship concern to the partnership firm M/s S.V.M Oil Industries,

Reasons for reopening of the matter for the assessment year 2015- 16, as extracted in para-2 of the assessment order, read as under:-  "On perusal of High Risk CRU/VRU transaction information, available on the INSIGHT Portal of the department it is noticed that the assessee is a director in company namely M/s Sunny Real Construction Pvt. Ltd. and had provided unsecured loan to the company for purchasing of an immovable property of Rs. 3,79,16,890/- for which source of investment is unexplained.  The assessee Sh. Vishnu Kumar is Prop. M/s Shri Ramesh Industries and having 40% share in M/s Sunny Real Construction Pvt. Ltd. He is also a partner M/s S.V.M. Oil Industries. He has advanced the loan M/s Sunny Real Construction Pvt. Ltd. In regard to the source of amount advanced to M/s Sunny Real Construction Pvt. Ltd. and to examine the creditworthiness of Directors and genuineness of the transactions, assessee replied in response to the notice u/s 133(6) of the Act that the amount advanced was given out of capital withdrawn from his partnership firm M/s SVM oil industries. Bank statement of M/s SVM oil Industries has been filed form which amount of loan advanced to M/s Sunny Real Construction Pvt. Ltd. All the payments were made through banking channel. Total Turnover of the M/s SVM oil Industries was Rs. 96,46,88,637/- and 81,74,25,829/- for FY 2014-15 and 2015-16 respectively.

At the set out, as per reasons for reopening of the matter, the assessee was informed that as per details available with the Department “the amount of loan advanced to M/s Sunny Real Construction Private Limited for assessment year 2015-16” remained unexplained, “as source of capital introduced in M/s S.V.M Oil Industries by the assessee was not Sh. Vishnu Kumar verifiable and not inserted with income declared in ITR”, and as such, income of Rs. 3,79,16,890/- had escaped assessment within the meaning of Section 147 of the Act.

Draft assessment order is dated 27.03.2022, relevant paras 10 to 12 need to be reproduced for ready reference, when reproduced the same read as under:- “10. During the year under consideration, the assessee has provided unsecured loan to Mis. Sunny Real Construction where he is a Director for purchase of immovable property of Rs.379168890/-, The assessee replied vide his letter dated 16.12.2021 that the firm has introduced capital of Rs.4965000/- and purchased land for establishment of industries in 2011. The assessee did not provide the details of immovable property for the year under consideration. Further vide his letter dated 31.1.2022, the assessee denied that he has not purchased any immovable property during the financial year 2014-15. He stated that the firm has not provided any unsecured loan/advance to any person and firm during the F.Y. 2014- 15. He stated that the firm has purchased land from Rajasthan Industrial Investment Corpn. on Oct. 2011 and the land has been purchased in 2011 not covered this F.Y. 2014-15. The assessee vide letter dated 5.3.2022 accepted that the firm has purchased land from UIT Bharatpur that is State Govt. owned Corpn. of Rs. 39878212/- and transfer of fund were through banking channel and the Bid amount paid and such type of Institution are not prepared any agreement to buyer but the assessee has transferred voucher which is provided by bank. The loan has been provided to company by Directors of the company.

Further the contention of the assessee that all the payments have been made for purchase of immovable property through banking channels is not acceptable in view of the following judgement. Transaction by cheques may not be sacrosanct- Reliance is placed on the decision of Hon'ble Court in the case of Nemi Chand Kothari v. CIT[2003] 264 ITR 254 in which it is held that It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditors the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors vis-à-vis the transaction which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself-

Looking to the facts of the case discussed above for the year under consideration, the investment made by assessee for purchase of immovable property amounting to Rs.37916890/- on account of unsecured loan remained unexplained.

As noticed above, the addition u/s 68 of the Act has been made, by way of assessment order, due to the reason that “the investment made by the assessee for purchases of immovable properties, amounting to Rs. 3,79,16,890/- on account of unsecured loan” remained explained.

But, as already noticed above, the reasons for reopening of the assessment, as communicated to the assessee were that since the amount of capital introduced by the assessee in M/s S.V.M Oil Industries, during the assessment year 2015-16 was found unexplained, even the investment made by assessee for purchase of immovable property amounting to Rs.37916890/- on account of unsecured loan remained unexplained.

Comparison of the reasons mentioned in para 11 “reasons for reopening”, dated 11.03.2022 with the conclusion drawn in the two Sh. Vishnu Kumar assessment orders i.e. the Draft assessment order and the final assessment order, would reveal that same are totally different. Had the assessment order been in consonance with the reasons given in the show cause notice accompanying the draft assessment order, then the things would have been otherwise. This goes to show that proper and thorough enquiry was not conducted by the Assessing Officer keeping in view the Reasons recorded for reopening of the matter. It further shows that while drawing conclusion in passing the assessment order, the Assessing Officer did not keep in mind the Reasons which were communicated to the assessee.

Even otherwise Learned CIT(A) appears to have not applied mind in confirming the addition u/s 68 of the Act. In para 8.3 of the impugned order, Learned CIT(A) observed as under:- “8.3 Findings and decision: I have carefully considered the facts of the case as well as submissions filed by the appellant. ! find no force in the argument taken by the assessee. The Assessing Officer has given detailed reasons for making the addition in para 9, 9.1, 9.2, 10 and 11 of the assessment order. The Assessee has not been able to contovert these. He has only stated that these transactions are through banking channels and that the Assessing Officer was pre-decided to make the addition. The Assessee has fürnished no evidence toward's this end. Accordingly, the addition of Rs.3,79,16,890/- made by the AD on account of unexplained cash credit u/s 68 of the Act is hereby confirmed. The ground no.4 is thus dismissed.

As a result, this appeal deserves to be allowed. Same is allowed and the impugned assessments passed by Assessing Officer and the impugned order passed by Learned CIT(A) are hereby set aside, only on legal grounds raised before us. Order pronounced in the open court on 06/09/2024.