ANOOP NOPANY,KOLATA vs. ITO, WARD 40(1), KOLKATA

order : April 23, 2024 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 19.07.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has taken the following grounds of appeal:

2. That on the facts and in the circumstances, of the case, the Ld. CIT(A) erred by disregarding crucial facts wherein the appellant diligently provided vital information regarding cash deposit of Rs. 99,78,000/- received from clients for business purposes during the assessment proceedings despite the appellant's submission, the Ld. Assessing Officer failed to examine this information and erroneously included the entire sum in the appellant's total Income. The extreme oversight is not only unsustainable in law but also void, void - ab-initio and liable to be quashed due to its grave error in judgment.

on or before the date of hearing as may be allowed by hon'ble appellate authority.”

3. The brief facts of the case are that the assessment of the assessee was selected for scrutiny and the assessment order dated 30.12.2016 was passed in the case of the assessee u/s 143(3) of the Act and returned income of the assessee was accepted. Thereafter, the ld. Principal Commissioner of Income Tax (in short ‘PCIT’) invoked his revision jurisdiction u/s 263 of the Act. The ld. PCIT in para 2 of the order observed that on examination of the records of assessment proceedings, it revealed that the Assessing Officer while completing the assessment proceedings u/s 143(3) of the Act failed to examine several issues despite the case being converted from limited scrutiny to complete scrutiny. He, therefore, observed that the assessment order passed by the Assessing Officer dated 30.12.2016 was erroneous and prejudicial to the interest of the revenue. The ld. PCIT further observed that on perusal of the assessment records, it revealed that the assessee had deposited cash amount to Rs.92,65,000/- in his current bank account with ICICI Bank and further Rs.37,85,000/- with HDFC Bank, which was not commensurate with the nature of the assessee’s business. The assessee had shown himself as sundry debtor amounting to Rs.11,80370/- in his proprietorship concern and the said amount

Assessment Year: 2014-15 Anoop Nopany needed to be disallowed. He further observed that the assessee had shown sundry creditors of Rs.1,67,79,246/- in its personal balance sheet and this fact also did not commensurate with the nature of business of the assessee. He observed that the Assessing Officer had not examined all these aspects of cash deposits and sundry creditors etc and accordingly held the order as erroneous and prejudicial to the interest of the revenue. He accordingly set aside the assessment order for de novo assessment. Thereafter, a fresh assessment order was framed by the Assessing Officer u/s 143(3) r.w.s 263 of the Act, wherein, the Assessing Officer made the addition of Rs.99,78,000/- on account of unexplained cash credits in the bank account of the assessee and also of Rs.47,70,140/- on account of unexplained sundry creditors vide order dated 31.12.2018. The ld. CIT(A) confirmed the addition so made by the Assessing Officer vide impugned order dated 19.07.2023. The assessee has come in appeal agitating the aforesaid additions.

Assessment Year: 2014-15 Anoop Nopany No.20/2015 dated 29.12.2015, the relevant part of which is reproduced as under:

“During the course of assessment proceedings in Limited Scrutiny cases, it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for ‘Complete Scrutiny’ with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating ‘Complete Scrutiny’ in that particular case such case shall be monitored by the Range Head.” The ld. counsel has pointed out that such procedure as mentioned in the above Circular was not followed and no approval was granted by the concerned PCIT/CIT for converting the limited scrutiny into complete scrutiny and therefore, there was no question of scrutinization on the issue of cash deposits and sundry creditors by the Assessing Officer. The assessee has categorically taken this plea before the CIT(A) also.

Assessment Year: 2014-15 Anoop Nopany

“The Hon’ble Court held that the Ld single judge, therefore, while agreeing with the points raised by the appellant partly, did agree with the contention mainly with regard to the observations of the mandatory requirement of service of notice upon the appellant resulting in the passing of the order under Section 147 of the Act and held that if the order under Section 147 of the Act, was not preceded by the service of a proper notice upon the appellant, such order was bad and accordingly proceedings under Section 263 of the Act emanating and originating from such an order were also bad.” ii. Kiran Singh vs. Ors. Vs. Chaman Paswan & Ors. (1955) 1 SCR 117 (SC), wherein, the Hon’ble Supreme Court observed as follows:

“It is a fundamental principle well established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties.” iii. M/s Westlife Development Ltd. vs. Principal CIT in (ITAT, Mumbai, ‘G’ Bench), wherein, the Tribunal has held as under:

“That the original assessment order passed u/s 143(3) dt. 24.10.2013 was null and void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the CIT could not have assumed jurisdiction under the law to make revision of non-est order and, therefore, the impugned order passed u/s 263 of the Act by the CIT is also nullity in the eyes of law and therefore, the same is hereby quashed.”

Assessment Year: 2014-15 Anoop Nopany

“12. A perusal of the above order reveals that various Courts of Law including the Hon'ble Supreme Court has held that a defect of jurisdiction whether its pecuniary or territorial or whether it is a subject- matter of the action, strikes at the very validity of the Court to pass any decree and such a defect cannot be cured even by consent of the parties. That a decree passed by a Court without jurisdiction is a nullity and that its invalidity can be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. That the issue of jurisdiction can be raised at any stage even in appellate or execution stage. Neither the Rule of Estoppels nor the Principle of res-judicata can confer the jurisdiction where none exists. The facts in the case of P. B. Doshi 113 ITR 22(Gujrat) are very much relevant wherein re-assessment proceedings were initiated against assessee and an addition was made to his income. Before AAC, contention about validity of notice for re- assessment was given up by the assessee and on merits appeal was dismissed. On further appeal, Tribunal remanded matter to file of ITO with direction to on re-examine witness and then complete assessment. ITO on remand completed assessment and again made addition. On appeal, assessee re-agitated point of validity of re- assessment proceedings on ground that there was mere change of opinion. AAC found that no reasons were recorded by ITO before issuing notice for re-assessment and, therefore, held that ITO had no jurisdiction to re-open assessment. Tribunal held that in restoring case to file of ITO by earlier order, only point left open was in respect of addition of on merits and that legal or jurisdictional aspect whether re- assessment proceedings were legally initiated was not kept open; It also held that even though this point went to root of jurisdiction and was pure question of law, merely because point was initially raised and not pressed when matter was taken up before AAC, it could be waived and it could not be reagitated ; The Hon'ble Gujarat High Court reversing the order of the Tribunal held that if the jurisdiction cannot be conferred by consent, there would be no question of waiver, acquiescence or estoppel or the bar of res judicata being attracted because the order in such cases would lack inherent jurisdiction unless the conditions precedent are fulfilled and it would be a void order or a nullity. The above decision of the Hon'ble Gujrat High Court has also been followed by the co-ordinate

Assessment Year: 2014-15 Anoop Nopany bench of the Tribunal in the case of "Indian Farmers Fertilizers Co- operative Ltd vs KIT" 105 lTD 33 (Del) as discussed above. Even, the Tribunal in the case or Dhiraj Suri 98 lTD 87 (Del) in an appeal against the penalty order has held that if the assessment order was without jurisdiction, there was no question of levy of penalty, therefore, it was open to the assessee to set up the question of validity of the assessment in the appeal against levy of penalty. The Hon'ble Bombay High Court in the case of investors Industrial Corporation 194 ITR 548 (Bombay) has held that the assessee was entitled to challenge the jurisdiction of the AO to initiate reopening of assessment proceedings before the CIT (A) in the second round of proceedings even though it has not raised the same before earlier proceedings before the AO or in the earlier appeal.

Assessment Year: 2014-15 Anoop Nopany Copy of the order forwarded to: 1. Anoop Nopany 2. ITO, Ward-40(1), Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR),