RAJESH A YAGNIK,MUMBAI vs. ACIT 16(2), MUMBAI

Date of Hearing – 31.05.2016 Date of Order – 15.06.2016

O R D E R PER SAKTIJIT DEY, J.M.

Instant appeal by the assessee is directed against the order dated 18th March 2014, passed by the learned Commissioner (Appeals)–28, Mumbai, confirming imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2008–09.

2 Shri Rajesh A. Yagnik declaring total income of ` 17,57,650. In the course of assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction on account of interest expenditure amounting to ` 4,95,495, called upon the assessee to establish the nexus between the expenditure incurred and income derived from the business. Alleging that the assessee failed to prove the nexus, he disallowed interest expenditure of ` 4,95,495 and added back to the income of the assessee. On the basis of addition made in the assessment order the Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c), alleging furnishing of inaccurate particulars of income. In response to the show cause notice issued by the Assessing Officer under section 274 r/w section 271 of the Act, though the assessee objected to initiation of penalty proceedings, however, the Assessing Officer rejecting the explanation of the assessee, proceeded to pass an order imposing penalty of ` 2,26,075 under section 271(1)(c). Being aggrieved of the penalty order so passed, assessee preferred an appeal before the learned Commissioner (Appeals), inter–alia, on the ground that impugned penalty order passed by the Assessing Officer and communicated to the assessee having not been signed by the Assessing Officer is invalid in law. The learned Commissioner (Appeals), however, did not find merit in the claim of the assessee. The learned Commissioner (Appeals) observed, as per the information obtained

3 Shri Rajesh A. Yagnik from the Assessing Officer vide letter dated 7th March 2014, the penalty order available in his record has been signed by the Assessing Officer. Further, the learned Commissioner (Appeals) also held that in the facts and circumstances of the case, imposition of penalty under section 271(1)(c) is justified. Being aggrieved of the order of the learned Commissioner (Appeals), assessee is in appeal before us.

4 Shri Rajesh A. Yagnik of signed penalty order by the Assessing Officer was also brought to the notice of learned Commissioner (Appeals) vide letter dated 7th November 2013, 4th December 2013 and 7th February 2014. The learned Authorised Representative submitted, in spite of such fact on record, the learned Commissioner (Appeals) upheld the imposition of penalty on the basis of an unsigned penalty order communicated to the assessee without properly appreciating the contentions raised before him and the legal principle as laid down in the judicial precedents. Learned Authorised Representative submitted, an unsigned order is not a valid order, hence, cannot be taken cognizance of, therefore, no penalty can be imposed on the basis of such an order. For such proposition he relied upon the decision of the Tribunal, Mumbai Bench, in Vijay Corporation v/s ITO, ITA no.1511/Mum./2010 dated 20th January 2012.

5 Shri Rajesh A. Yagnik on the body of the order. The assessee has also filed an affidavit clearly and categorically stating therein that unsigned penalty order is the only order received by him from the Assessing Officer. The claim of the assessee appears to be correct considering the fact that the assessee on more than one occasion has requested the Assessing Officer to supply a signed copy of the penalty order. This fact has also been brought to the notice of the first appellate authority during the pendency of assessee’s appeal. However, the learned Commissioner (Appeals) has dismissed / rejected the plea of the assessee in a mechanical and routine manner by accepting the version of the Assessing Officer that a signed copy of the penalty order is available in the Assessing Officer’s record. Availability of signed copy of the penalty order in Assessing Officer’s record does not prove the fact that penalty order communicated to the assessee was signed by the Assessing Officer. When the assessee has repeatedly requested the Assessing Officer to supply a signed copy of the penalty order, we see no reason why the Assessing Officer should be adamant and stubborn in his attitude in communicating a signed copy of the penalty order. In fact, the Department has failed to conclusively prove the fact that the penalty order communicated to the assessee was signed by the Assessing Officer, whereas, the assessee not only has produced the original unsigned penalty order received from the Assessing Officer but also filed an affidavit in 6 Shri Rajesh A. Yagnik support of such claim. In our view, in the absence of any contrary evidence brought to our notice, we are inclined to accept assessee’s version that the penalty order received by the him from the office of the Assessing Officer does not bear the signature of the Assessing Officer. Therefore, in our opinion, an unsigned order has no legal sanctity, hence, in valid in law. This view is supported by the decision of the Tribunal, Mumbai Bench, in Vijay Corporation (supra), wherein, the co–ordinate bench of the Tribunal while dealing with similar nature of dispute has held as under:–

“6. The Hon’ble Supreme Court in the case of Smt.Kilasho Devi Burman (supra) did not give any importance to the service of notice of demand duly signed but emphasized the requirement of the law that an order of assessment had to be signed for its validity. The revenue authorities have in the present case proceeded on the footing that the requirement of law is complied with when a signed notice of demand exists or is served on an Assessee. In our view the question in the case before the Hon’ble Supreme Court in the case of Kalyankumar Ray (supra) was the absence of a tax calculation in the order of assessment. The order of assessment duly signed existed. The present case is a case where there was no signed order of assessment. We are of the view that the decision in the case of Smt.Kilasho Devi Burman (supra) squarely covers the issue in favour of the Assessee. In the absence of a signed order of assessment, we have to hold that assessment is invalid. We are also of the view that the provisions of Sec.292B cannot come to the rescue of the revenue. The provisions of Sec.292B reads as follows: “292B. Return of income, etc., not to be invalid on certain grounds.-- No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if 7 Shri Rajesh A. Yagnik such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. Provisions of Sec.143(3) of the Act contemplates that the AO shall pass an order of assessment in writing. The requirement of signature of the AO is therefore a legal requirement. The omission to sign the order of assessmenet cannot be explained by relying on the provisions of Sec.292B of the Act. Tax computation is a ministerial act as observed by the Hon’ble Supreme Court in the case of Kalyankumar Ray (supra) and can be done by the office of the AO if there are indications given in the order of assessment. But the notice of demand signed by the office of the AO without the existence of a duly signed order of assessment by the AO, in our view cannot be said to be a omission which was sought to be covered by the provisions of Sec.292B of the Act. If such a course is permitted to be followed than that would amount to delegation of powers conferred on the AO by the Act. Delegation of powers of the AO u/s.143(3) of the Act is not the intent and purpose of the Act. An unsigned order of assessment cannot be said to be in substance and effect in conformity with or according to the intent and purpose of the Act.

7. We therefore hold that the order of assessment is invalid. The appeal of the Assessee is accepted on this ground. The other issues raised by the Assessee are therefore not taken up for consideration.