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Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Appearances by: Assessee represented by : Rishi Raju, Adv. Department represented by : Prabir Gupta Choudhury, Addl. CIT Date of concluding the hearing : September 05, 2024 Date of pronouncing the order : September 09, 2024
ORDER
Per Sonjoy Sarma, Judicial Member:
This appeal filed by the assessee pertaining to the Assessment Year (in short ‘AY’) 2013-14 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the ‘Act’) by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 03.06.2024 arising out of Assessment Order dated 27.09.2021, passed under Section 147 read with section 144B of the Act.
The Assessee has raised the following grounds of appeal:
Sharda Devi Agarwal “A. For that, at the outset, the appellant states and submits that the impugned order is illegal, arbitrary, unreasonable, violative of principles of natural justice and bad in law. B. For that the both the assessment and appellate authority has failed to appreciate that the appellant was entitled to benefit under Section 10(26AAA) of the Act, and consequently, the demand of tax is illegal and arbitrary. C. For that the assessment has been incorrectly made under Section 144 of the Act, especially, where the appellant had duly provided proper explanation along with evidentiary material to establish the source, creditworthiness and genuineness of the credit of money received in its bank accounts. In such circumstances, the application of Section 144 of the Act is unwarranted and illegal. D. For that the assessing officer did not possess proper jurisdiction to initiate re-assessment proceedings under Section 147 of the Act, as there was no income which had escaped assessment. E. For that the appellate failed to appreciate and acknowledge the additional submissions made before such authority.
F. For that the appellate authority failed to appreciate that the Hon'ble Supreme Court by its decision dated 13.01.2022 in Writ Petition (civil) bearing no. 59 of 2013, had held that total Income earned and accrued from within Sikkim is exempt from Tax, which was squarely applicable to the facts of the case. G. For that without prejudice to the above, the money credited into the account is from known sources, who are creditworthy, and the same occurred pursuant to a genuine transaction. In such circumstances, the addition under Section 69A of the Act is unwarranted and illegal. H. For that the impugned order suffers from non-application of mind, which is in violation of principles of natural justice. PRAYER In light of the foregoing facts, circumstances and submissions, it is humbly prayed before the Hon'ble Tribunal, to grant the following prayer/s: (i) Set aside the order bearing no. ITBA/NFAC/S/250/2024-25/1065349134(1) dated June 03, 2024 passed by the Ld. Commissioner of Income tax (Appeals) under Section 250 of the Income tax Act, 1961, Sharda Devi Agarwal (ii) Set aside the addition of income under Section 68 of the Income tax Act, 1961 along with the corresponding demand of tax, interest and penalty, (iii) Grant an opportunity of hearing, and (iv) Pass any other such order or orders that may deem fit in the interest of justice.
At the time of hearing, the Ld. Authorised Representative stated that the certain additions were made in the case of the assessee while framing the assessment order under Section 144/147 of the Act vide order dated 27.09.2021.
Aggrieved by the above order, the assessee went in appeal before the Ld. CIT(A). However, assessee’s appeal was dismissed by sustaining the addition made by Assessing Officer. Aggrieved by the above order, the assessee is in appeal before this Tribunal, although the assessee has raised multiple grounds but the Ld. Authorised Representative stated that the assessee would argue first on the ground No. 6 of the appeal by which Ld. AR stated that assessee is exempt from payment of tax in view of the order passed by the Hon'ble Supreme Court in Writ Petition (C) No. 59 of 2013 as in the case of Association of Old Settlers of Sikkim and Ors. Vs. Union of India and Anr. on the issue of applicability of section 10(26AAA) of the Act. The relevant para of the said judgment of the Hon'ble Supreme Court has stated as under: “13.1 It is to be noted that as such the purpose of Section 10(26AAA) is to grant exemption to the residents of Sikkim from payment of income tax under the Income Tax Act. Therefore, all such Indians/citizens, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 are to be treated at par and they form the same group/class and are entitled to the exemption under Section 10(26AAA) of the Income Tax Act. As such, there is no difference and/or distinction between those "Sikkim Subjects", whose names are recorded in the register maintained under the Sikkim Subjects Regulations, 1961 and those Indians, who have settled in Sikkim prior to the merger of Sikkim, but whose names were not recorded as "Sikkim Subjects" in the register maintained under the Sikkim Subjects Regulations, 1961. All are "Sikkimese". Merely because at the relevant time and when the Sikkim Subjects Regulations, 1961 was enacted, the Indians settled in Sikkim did not surrender their Indian citizenship or 3 Sharda Devi Agarwal their fathers/forefathers' names were not entered into the register maintained under the Sikkim Subjects Regulations, 1961, by itself, it cannot be said that they cease to be the "Sikkimese". All of them are similarly situated with those "Sikkimese" / "Sikkim Subjects", who all have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975. As observed above, the object and purpose of Section 10(26AAA) is to grant benefit of exemption from payment of income tax under the Income Tax Act to the residents of Sikkim. Therefore, there is no nexus sought to be achieved in excluding the Indians, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 but their names are not recorded as "Sikkim Subjects". The Union of India has failed to satisfy any reasonable classification and/or nexus to exclude such class of Indians, who, in fact, have settled in Sikkim prior to 26.04.1975. Therefore, exclusion of old Indian settlers, who have settled in Sikkim prior to the merger of Sikkim with India on 26.04.1975 from the definition of "Sikkimese" in Section 10(26AAA) is arbitrary, discriminatory and violative of Article 14 of the Constitution of India.”
Assessee’s another limb of argument the ground No. 3 and 7 are that the assessment order dated 27.09.2021 passed by the Assessing Officer is invalid being framed without looking into the fact as and when assessee had duly provided proper explanation along with material to establish the source, creditworthiness and genuineness of credit of money received in its bank account. While passing the impugned order, the Ld. CIT(A) did not look into the fact by simply dismissed the appeal of the assessee by sustaining the addition made by the Assessing Officer. Therefore, the impugned order passed by the Learned CIT(A) is not in accordance with law and liable to be set aside.
On the other hand, the Learned Departmental Representative states that the issue challenged before the Bench in the Ground No. 6 of this appeal was never brought into the notice of the Learned CIT(A) on the part of the assessee. Although the impugned order challenged by the assessee was passed on 03.06.2024 and the Hon'ble Supreme Court had passed the order on 13.01.2023 which was quite prior to the passing of the impugned order. Also, the necessary certificate proving the domicile of the assessee from a specified time in Sikkim state was not presented before any of the authorities below. Therefore, it is necessary to remand back the issue to the file of Ld. 4 Sharda Devi Agarwal CIT(A) for considering the documents furnished by the assessee before the Bench and examine the issue in terms of the Hon'ble’ Apex Court order passed regarding allowability of exemption as claimed by the assessee as in the case of Association of Old Settlers of Sikkim and Ors. Vs. Union of India and Anr. (supra).
We after hearing the rival submissions of the parties and perusing the material available on record and respectfully considering the Hon'ble Supreme Court verdict passed in the case of Association of Old Settlers of Sikkim and Ors. Vs. Union of India and Anr. (supra). It is necessary to remand back the whole issue to the file of Learned CIT(A) with a direction to examine the issue afresh after considering the judgment rendered by the Hon'ble Supreme Court regarding the issue relating to applicability of exemption claimed by the assessee and the connected domicile certificate issued by the District Authorities. We also direct the Learned CIT(A) to issue notice to the assessee while passing such order by providing reasonable opportunity of being heard to the assessee. In terms of the above, assessee’s appeal is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes. Kolkata, the 9th September, 2024.