INCOME TAX OFFICER, INCOME TAX OFFICE vs. RITU BALA, FARIDABDA

1. "Whether on facts and circumstances of the case, Ld. CIT(A) erred in law while holding that notice for assessment has to be necessarily issued even when no ITR was filed in response to notice u/s 148?

2. Whether on facts and circumstances of the case, Ld. CIT(A) erred in law in holding the reassessment to be invalid even when AO was legally empowered to make assessment u/s 144 after issuing notice u/s 142(1), on failure of the assessee to file an ITR in response to notice u/s 148?

3. Whether on the facts and circumstances of case Ld CIT(A) is correct in deleting the addition on account of Bogus purchases and unexplained expenditure even when assessee deliberately stone walled efforts at enquiring into her affairs by failing to respond to statutory notices?

4. Whether on the facts and circumstances of case Ld CIT(A) is correct in deleting the addition of Rs.4,23,21,000/ on account of unexplained expenditure u/s 69C even when assessee failed to discharge her onus of explaining such abnormally high cash withdrawals both during assessment and appellate proceedings?

5. Whether on facts and circumstances of the case, Ld. CIT(A) erred in not calling for a remand report in the matter u/s 250(4), considering that AO was forced to make an ex-parte assessment due to the deliberate ploy of the assessee to ignore statutory notices?

6. Whether on facts and circumstances of the case, Ld. CIT(A) has erred in ignoring the credible evidence regarding assessee obtaining accommodation entries in form of bogus purchases through entities who were found involved in fake GST claims and allowing relief on technicalities?

7. Whether on facts and circumstances of the case and in law Ld. CIT(A) erred in admitting additional evidence in violation of rule 46A and therefore the order of CITI) needs to be set aside."

5. Learned Authorized Representative for Revenue submitted that notice under section 148 in this case was issued to the assessee on 31.03.2022 requiring to furnish, within 30 days from service of notice, a return in the prescribed form for the assessment year 2018-19. No return of income filed by the assessee in response to notice under section 148. Notice under Section 142(1) of the Act was issued to the assessee on 23.01.2023 to furnish the reply on or before 04.02.2023. In response there to no reply filed by the assessee. In response to show cause notice dated 13.02.2023, assessee replied on 09.03.2024 stating that the “system does not allow to furnish ITR against notice issued u/s 148, there may be some technical issues. The assessee furnished her ITR under Section 139(1) on 25th October 2018. 5.1 Assessee was required to file the ITR on or before 30th April 2022 in response to notice under Section 148 issued to her on 31.03.2022. Assessee failed to file a valid ITR in response to notice under Section 148. During the assessment proceedings the assessee submitted on 09.03.2022 that "system does not allow to furnish ITR against notice issued under Section 148, there may be some technical issues." The submission made by the assessee on 09.03.2022 is only after thought and to vitiate the assessment proceedings as assessee has made his submission not on facts but only assuming that there may be some technical issue. 5.2 As per section 148 of the Act, the assessee was required to furnish a valid ITR on or before 30.04.2022 but the assessee failed to comply with the provisions of section 148 of the Act. Hence, in the absence of valid return in response to notice under Section 148 of the Act, notice under Section 143(2) cannot be issued as per Income Tax Act, 1961, hence, no question arises to issue notice under Section 143(2) of the Act. 5.3 As per the information forwarded through REIC, related with the cases of issuance of bogus sales invoices booked by the CGST, Kolkata, in the case of M/s. Hanuman Trading, M/s. Ultra Trade Mart, Rajiv Dhar etc. that, the referred entity was found indulging in issuance of fraudulent / fake / GST invoices for passing irregular input tax credit to other business entities and for doing this they have also availed and utilized Input Tax Credit (ITC) against fake invoices issued by other. These companies found to be bogus entity having no existence at their declared places of business as well as the palaces where the consignments were purportedly received. And the assessee was one of the parties who taken bogus entries in the form of bogus purchases. Ld. AO during assessment proceedings issued notices under Section 133(6) to these entry providers, however, neither these providers nor the assessee submitted any reply which clearly shows that they have nothing to submit in this regard. 5.4 As per the data available on the website (GST.gov.in), the above entity has been found to be "inactive". The entities in whose case the GST registration has been "Cancelled" suo-moto the interpretation of this status is that these entities were formed supplying any goods without issuing an invoice or simply issuing invoices without supplying any goods or services, discontinuation of the business, non-filing of returns, etc. In this circumstance the entities have been suspended/cancelled for violation under the GST Act. 5.5 Assessee has neither provided any ledger nor any bills/invoices in support of his purchase transactions thus, the genuineness and correctness of the expenses or purchases incurred by the assessee could not be established and hence these transactions claimed in shape of purchases amounting to Rs.2,64,84,517/- made with the parties cannot be said that this is a business expenses in shape of purchase. As the assessee failed to establish the identification, creditworthiness and genuineness of the parties from whom the purchases amounting to Rs.2,64,84,517/- was made Hence, the Ld. AO has rightly was added back amounting to Rs.2,64,84,517/- to the total income of the assessee under Section 69C of the Income-tax Act 1961. 5.6 It is observed that the assessing officer has made an addition of Rs.4,23,21,000/- in the light of provisions enumerated in Section 69A of the Act. Section 69A is analyzed into its essential parts:- (a) The assessee must be found to be the owner. (b) He must be the owner of any money, bullion, jewellery or other valuable articles. (c ) The said articles must not be recorded in the Booles of Account, if any maintained.

6. Learned Authorized Representative for the Respondent/Revenue relied on order of Ld. CIT(A).

which are relevant in the present facts and circumstances of the case.

1. Ld. Income Tax Officer, Ward 2(1), Faridabad erred in issuing the notice dated 31-03-2022 u/s 148 in violation of the Notification no. 18/2022 dated 29-03-2022 issued by the CBDT. Hence the said notice is invalid as has been issued other than faceless mode.

2. National Faceless Assessment Centre (NaFAC) erred in framing assessment without issuing mandatory notice u/s 143(2).

It is seen that the appellant has raised this issue for the first time before me through filing additional grounds and prayed that in the interest of justice the additional grounds may kindly be allowed. Considering the judgment of Hon'ble of Supreme Court in the case of National Thermal Power Company Ltd., Vs. CIT, 229 ITR 383 (SC) the additional ground filed by the appellant is accepted. In filing the additional grounds the appellant has challenged the validity of assessment order framed under section 147 r.w.s. 144 read with section 144B. Since the appellant has questioned the validity of the assessment order itself which is a preliminary issue, it is adjudicated first. a) The appellant has raised additional ground No.1 against the notice issued u/s 148 in violation of the Notification no. 18/2022 dated 29-03- 2022 of CBDT. As per Form No. 35, this appeal has been filed against order under section 147 r.w.s. 144 r.w.s. 144B dated 23/03/2023. In this appeal only the issues raised in the assessment order framed by National Faceless Assessment Centre (NaFAC) can be raised and be adjudicated upon. Thus, the ground raised is dismissed. b) Ground No.2 is against the assessment order framed without issuing mandatory notice u/s 143(2). During the course of assessment proceedings, in response to the show cause notice issued u/s 144 to frame best judgement assessment, the appellant vide letter dated 9th March 2023 submitted as under: "In this context, It is submitted, System does not allow to furnish ITR against notice issued u/s 148, There may be some technical Issues. It is respectfully submitted that, Assessee furnished her ITR u/s 139(1) on 25th October 2018 declaring gross total taxable income of Rs 6,80,674 /. You are hereby requested to consider earlier furnished return u/s 139(1) of Act for the purpose of Section 147 or say for instant assessment proceeding u/s 147 of income Tax Act 1961." The appellant raised through filing of additional grounds that no notice under section 143(2) was issued in the case. Only the notices under section 142(1) together with questionnaire was issued. The appellant therefore agitated the validity of the assessment order and contended that in the absence of statutory notice mandated under section 143(2), the assessment made is invalid. The appellant submitted that the Assessing Officer has to issue notice u/s 143(2) mandatorily before completing the assessment. The appellant submitted a copy "Screenshots of the profile of the Appellant and Notices issued to the Appellant through portal", and as can be seen from the same, no notice under section 143(2) has been issued anytime during the assessment proceedings. After examining the document on record, I am of the considered opinion that the AO had not issued notice u/s 143(2) even though there was an original Return of Income filed. Further, as per para 3.2.1 of the assessment order the AO has stated in 3.2.1 Issue No.2- Cash withdrawal the assessee has deposited/withdrawn substantial amount in the bank accounts however, no return of income filed for the said assessment year. This being an incorrect fact as the appellant had furnished the Income Tax Return electronically on 25-10-2018 vide acknowledgment no. 346310651251018 declaring income of 2.6,80,670/-. The Appellant has submitted before me a copy of the Income Tax Return in support of her contention, the AO subsequently, passed the order u/s 147 r.w.s. 144 read with section 144B. As per the mandate of section 143(2), the notice for assessment has to be necessarily issued. Therefore, the re-assessment is held to be invalid as per law. In result, this ground of appeal is allowed.

2. Without prejudice to the legality of the assessment proceedings. I shall continue to discuss the original grounds as per Form No. 35 on merits. a) Ground No. 1 to 4 is regarding reopening of the assessment and without providing of any opportunity, is general in nature. It is seen the notice issued under section 148 and other notices has been issued to the appellant assessee and served through email available on IT Portal. It is duty of the appellant assessee to verify her email and if any changes are there in email id, she should update it in the IT Portal. The submission of the appellant is not found satisfactory hence, the same is dismissed. In view of the same, ground No. 1 to 4 is dismissed. b) Ground No. 5 is regarding making addition of ₹.2,64,84,517/- u/s 37 on account of bogus purchase without appreciating material available on record. As per para 3.4- Variation proposed of the assessment order the AO has stated the assessee has neither provided any ledger nor any bills /invoices in support of his purchase transactions Thus, the genuineness nor correctness of the expenses or purchases incurred by the assessee could be established and hence these purchases amounting to Rs.2,64,84,517/- made with the parties mentioned above, are proposed to be added back to the total income of the assessee u/s 69C. Further, as per para 5- Variation proposed on the basis of inference drawn: total amount of Rs.2,64,84,517/- of bogus/unverified purchases is proposed to be disallowed as business expense of the assessee u/s 37 and is to be added to the total income of the assessee. It is seen that the AO is not sure under which section he propose to make the disallowance of purchases and in the final Table of Variation the disallowance has been done as per discussion above without quoting the section. Now, since there is a disallowance of purchases i.e. an expense and not considering it as business income of the assessee and added to the total income, it is assumed, it is a disallowance of business expense u/s 37. The appellant in her submission dated 9th March 2023 before the AO has submitted no such sale transactions have been executed with noticed party. The appellant had not made any purchase from these parties and did not execute any transactions. When no expense has been claimed by the appellant in her books on account of purchases made from these parties, no question of disallowance arises. In light of the above fact, the AO is directed to delete the addition of Rs.2,64,84,517/-. c) Ground No. 6 and 7 not being pressed by the appellant is accordingly dismissed. Thus, Ground no. 6 and 7 are dismissed. d) Ground No. 8 to 10 are related to each other and tantamount to only one substantial ground challenging the addition of 2.4,23,21,000/- on account of cash withdrawals u/s 69A. As per the assessment order, the AO has stated- "Since the assessee has failed to furnish any documentary evidences explaining the source of cash deposits and the credits that led to cash withdrawal in the bank account of the assessee amounting to Rs. 4,23,21,000/-, thus transactions amount remain unverifiable for want of documentary evidence with regard to their source. Thus, on account of failure on the part of the assessee in furnishing relevant documentary evidences for explaining the nature and source of the cash withdrawal in the specified bank as discussed above and further in the absence of any evidence of assessee maintaining books of accounts, the above mentioned transactions are seen to be unexplained money.

The appellant had submitted her detailed response and also filed the requisite documents, bank statements, balance sheet, P&L account, Tax Audit Report and provided all the details sought for but the AO did not rebut the appellant submission in this regard. It is seen that the books of accounts have been maintained by the assessee and all the withdrawals have been duly recorded. Details of enquiries made with third parties have not been logically concluded by the AO.

The Applicability of Section 69A in this case is now visited: It is observed that the assessing officer has made an addition of 2.4,23,21,000/- in the light of provisions enumerated in Section 69A of the Income Tax Act, 1961. Section 69A is analyzed into its essential parts:- (a) The assessee must be found to be the owner. (b) He must be the owner of any money, bullion, jewellery or other valuable articles. (c) The said articles must not be recorded in the Books of Account, if any maintained. (d) The assessee is unable to offer an explanation regarding the nature and the source of acquiring the articles in question; or the explanation, which is offered, is found to be in the opinion of the Officer, not satisfactory. (e) If the aforesaid conditions are satisfied, then, the value of the bullion, jewellery or other valuable article may be deemed as the income of the financial year in which the assessee is found to be the owner. (f) In the case of money, the money can be deemed to be the income of the financial year. In the light of dissected view of Section 69A, it can be inferred that the Assessing Officer shall and is duty bound to controvert the explanations provided by the appellant in case such explanation is found not acceptable. In view of the above Section 69A cannot be triggered in this case. The onus was upon the AO to establish the genuineness of the addition, In light of the above fact, the AO is directed to delete the addition of ₹.4,23,21,000/-. Thus, ground Nos. 8 to 10 raised is allowed. e) Ground No. 11 is general in nature and requiring no separate adjudication is dismissed. In view of the same, Ground No. 11 is dismissed. 1) Ground No. 12 is regarding incorrect charging of interest u/s 234A. I restore this issue back to the file of Assessing Officer for charging interest in accordance with the provisions of section 234A, keeping in view the Income Tax Return has been filed electronically on 25-10-2018. g) Ground No 13 is regarding not giving full credit for the Self- Assessment Tax amounting to ₹.56,618/- claimed by the appellant. The assessing officer is directed to verify the same and give credit for the same. Thus, ground No 13 raised is allowed in terms indicated above. h) As per ground of appeal no. 14 the appellant craves leave to add, alter, delete or abandon any of the grounds mentioned hereinabove. No new ground/other additional grounds has been raised at the time of hearing, therefore ground of appeal no. 14 is disposed of accordingly.

6. In result, the appeal of the appellant is partially allowed.”

8. From perusal of above, it is evident that the Ld. AO was not sure under which section he propose to make the disallowance of purchases and in the final Table of Variation the disallowance has been done as per discussion above without quoting the section. Now, since there is a disallowance of purchases i.e. an expense and not considering it as business income of the assessee and added to the total income, it is assumed, it is a disallowance of business expense under Section 37 of the Act. The assessee in submission dated 9th March 2023 before the AO submitted no such sale transactions were executed with noticed party. The appellant had not made any purchase from these parties and did not execute any transactions. When no expense has been claimed by the assessee in her books on account of purchases made from these parties, no question of disallowance arises.

being untenable, are dismissed.