SHIB NATH GHOSH,BERHAMPORE vs. I.T.O., WARD - 42(1), MURSHIDABAD

This appeal is filed by the Shib Nath Ghosh (Assessee / Appellant) against the appellate order passed by the National Faceless Appeal Centre, Delhi [hereinafter referred as Ld. CIT(A)] dated 8th August, 2024, for Assessment Year 2018-19, whereby the appeal filed by the Assessee against the assessment order dated 20th April, 2024, passed by the Income Tax Officer, national e- assessment center (Ld. AO) under section 143(3) read with section 144B of the Income Tax Act, 1961 (the Act) computing the total income of the Assessee as Rs.57,38,240/-, was dismissed.

Besides the grounds raised in the memorandum of appeals , the assessee has also raised additional grounds before us which are reproduced hereunder

The first issue raised by the assessee in the first additional ground is with regard to not following the CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017, while issuing notice u/s 143(2) of the Act on 09.08.2017 and consequently the said notice was invalid in law.

The ld. Counsel for the assessee vehemently submitted that the notice issued u/s 143(2) of the Act dated 9.08.2017 was not in consonance with CBDT Circular no. F.No.225/157/2017/ITA-II dated 23.06.2017 and therefore, the same is invalid and

The ld. Authorised Representative vehemently contended that the ld. AO is under obligation to issue the notice in any of the format according to the nature of scrutiny failing which would rendered the issuance of notice in violation of the mandate given by the CBDT Instruction no. F.No.225/157/2017/ITA-II dated 23.06.2017. The ld. Authorised Representative, while referring to the copy of the notice issued u/s 143(2) of the Act dated 09.08.2018 a copy of which is attached at page no.1 of the Paper book, submitted that the said notice was not issued in any of the three formats as contemplated by the above circular. Therefore, the notice itself is invalid rendering the assessment framed to be invalid.

The ld. Authorised Representative further in support his argument referred Hon'ble Apex Court decision in the case of UCO Bank Vs. CIT (1999) 237 ITR 889 (SC), wherein the Hon'ble Apex court stated that the CBDT u/s 119 of the Act has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers u/s 119 of the Act which are binding on the authorities below in the administration of the Act. The Hon'ble Apex Court held that u/s 119(2)(a) of the Act, the circular as

Arguing on the second limb of his augment, the ld. Authorised Representative submitted that the case of the assessee was selected for limited scrutiny as it is apparent from page 1 of the assessment order where the selection was made for excess contribution to the provident fund/superannuation Fund or gratuity fund. It means that it is only for the purpose of that particular issue and going beyond the scope of that issue a special permission of the competent authority is required to be obtained by the ld. AO before embarking upon the enquiry into those issues and thereafter passing the assessment order accordingly but that was not done. The ld. Authorised Representative further prayed that the assessment was framed by the ld. AO is without jurisdiction and addition made are liable to be deleted on this count. The ld. Counsel for the assessee relied on the decision of Calculate High Court in the case of PCIT vs. Weilburger Coatings (India) P. Ltd. (2023) 155 taxmann.com 580 (Calcutta) dated

The ld. DR relied on the orders of the authorities below by submitting that so far as the first issue is concerned of not issuing notice u/s 143(2) in either of the formats as provided in CBDT Circular No. F.No.225/157/2017/ITA-II dated 23.06.2017, is not in hand of the ld. AO as these notices were computer generated and the ld. AO has no authority to modify the contents of these notices. Therefore, the plea raised by the ld. Counsel for the assessee may kindly dismissed. On the second issue also, the ld. DR submitted that though the case of the assessee was selected for completed scrutiny, however, only one issue was stated in the said notice, therefore, the claim of the ld. Counsel for the assessee that it was limited scrutiny is wrong and may kindly be dismissed.

After hearing both the sides and the materials available on record, we find that the notice issued u/s 143(2) dated 9th August, 2017 was not in any of the formats as provided in the CBDT “The Central Board of Direct Taxes under section 119 of the Income-tax Act, 1961, has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Act which are binding on the authorities in the administration of the Act. Under section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases Which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by Issuing circulars binding on the taxing authorities. In order to aid proper determination of the income of money lenders and banks, the Central Board of Direct Taxes issued a circular dated October 6, 1952, providing that where interest accruing on doubtful debts is credited to a suspense account, It need not be included in the assessee's taxable income, provided the Income-tax Officer is satisfied that recovery is practically improbable. Twenty-six years later, on June 20, 1978, in view of the judgment of the Kerala High Court In STATE BANK OF TRAVANCORE v. CIT [1977] 110 ITR 336, the Board by another circular, withdrew with immediate effect the earlier circular. However, by circular dated October 9, 1984, the Board decided that Interest in respect of doubtful debts credited to suspense account by banking companies would be subjected to tax but Interest charged in an account where there has been no recovery for three consecutive accounting years would not be subjected to tax in the fourth year and onwards. The circular also stated that if there is any recovery in the fourth year or later, the actual amount recovered only would be subjected to tax in the respective years. This procedure would apply to assessment year 1979-80 and onwards.”

Similarly, Hon'ble Calcutta High Court in case of Amal Kumar Ghosh (supra), held as under:-

Since we have held the notice issued u/s 143(2) as invalid and so the consequential assessment framed, we are not adjudicating second legal issue raised in the additional ground no.2 as well the grounds in the memorandum of appeal and are left open to be adjudicated in future if the need arises for the same.

In the result, the appeal of the assessee is allowed.