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Income Tax Appellate Tribunal, SURAT (SMC
Before: SHRI DR. A. L. SAINI
आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2012-13, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), Surat [in short “the ld. CIT(A)”], National Faceless Appeal Centre (in short ‘the NFAC’), Delhi, dated 27.03.2023, which in turn arises out of an assessment order passed by Assessing Officer u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 20.12.2019.
2. The grounds of appeal raised by the assessee are as follows: “1. That the Ld. CIT(A) has erred in dismissing the appeal by passing order u/s 250(6) and sustaining the addition made by the AO.
ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya 2. That the order passed u/s 250(6) of the Income Tax Act, is bad in law as the same has been disposed off without examining the merits of the case and is against the principles of natural justice.
3. That the CIT(A) has erred in making addition of opening cash balance arbitrarily and without assigning any cogent reason and without bringing any evidence on record treated the opening balance of Rs.13,82,815/- as on 01.04.2011 of cash in hand to be that of unexplained cash credits u/s. 68.
That the CIT(A) has erred in confirming the addition made by the AO ignoring the fact, that the assessee being an agriculturist and not having any business income is not bound to maintain books of accounts.
5. For that and under the facts and circumstances of the case and in law, CIT(A) erroneously passed order as failed to consider the issues whether the "Reason recorded to believe escapement of income and said Copy of Reasons recorded "was duly served on the assessee is the precondition before initiation of proceedings and issuing notice u/s 147 and 148 of the IT Act 1961 is a grave question of fact as well as law, accordingly the action taken as well as order passed over looking that matter is liable to be set aside, (followed by order of ITAT-B-Bench Kol, dated 31" March 2022 in ITA No-73/Kol/2020).
6. For that and under the facts and circumstances of the case and in law, the present assessee craves liberty to take any further ground/grounds or annul, modify, the same during the course of final appeal hearing.”
3. The assessee has also raised the additional grounds of appeal
which is reproduced below: “1. The ld CIT(A), NFAC, Delhi has erred in confirming the action of the AO in framing the assessment and passing the order under section 143(3) r.w.s. 147 without serving notice under section 143(2). The assessee having not received u/s 143(2), the assessment made and the order passed under section 143(3) r.w.s 147 is a nullity, bad in law and liable to be quashed. For that and under the facts and circumstances of the case in law, the present assessee craves liberty to take any further ground/grounds or annul, modify, the same during the course of final appeal hearing.”
4. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is a senior citizen and engaged in agricultural activities. As per the provisions of section 139 of the Income Tax Act, 1961, the assessee had not filed his return of income for the assessment year (AY).2012-13. It was noticed by the assessing officer from the AIR/CIB/26AS information on the ITD that ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya assessee has made cash deposit of Rs.10,01,100/- in his bank account maintained with the Varachha Co-op. Bank Ltd and has received interest on fixed deposits during the year under consideration. Therefore, Assessment Proceedings u/s 147 of the Income Tax Act, 1961 were initiated in assessee`s case for A.Y. 2012-13 by issuing notice u/s 148 of the Income Tax Act, 1961 to the assessee on 31/03/2019 after obtaining necessary approval from competent authorities requesting him to deliver his return of income within 30 days from the receipt of the notice.
In response to the above notice, the assessee has furnished return of his income declaring total income at Rs.740/- and agriculture income to the tune of Rs.3,15,850/- on 29.04.2019. Thereafter, notice u/s 142(1) of the Income Tax Act, 1961 was issued to the assessee on 14.09.2019 requesting assessee to furnish the details and documents. In response to the above notice, the assessee has furnished the details and documents before the assessing officer.
During the course of assessment proceedings, on perusal of records, it was noticed by the assessing officer that in the cash-Book furnished for financial year (F.Y.) 2011-12, the assessee has shown opening cash balance of Rs.18,82,815/-. However, it was noticed by assessing officer that assessee has not filed any return of income up to assessment year (A.Y.) 2011-12). Further, assessee has not furnished any documentary evidences to justify the opening cash balance. It was further noticed from the ITS data that assessee has received Rs.17,990/- as interest on fixed deposits from Bank of Baroda during the year but has not offered the same for taxation in the return of income filed.
ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya Therefore, a show cause notice was issued on 03.12.2019 to the assessee, which is reproduced below: “Please refer to the ongoing assessment proceedings in your case for A. Y. 2012-13.
During the course of assessment proceedings, on perusal of the records it is noticed that in cash-book furnished for F.Y. 2011-12, you have shown opening cash balance of Rs. 18,82,815/-. However, you have not filed any return of income upto A.Y. 2011-12. Further, you have not furnished any documentary evidences to justify the huge opening cash balance. Therefore, in absence of any details/documentary evidences/justification, you are requested to show cause as to why the amount of Rs.18,82,815/- claimed as opening cash balance as on 01.04.2011 should not be disallowed and treated as unexplained and added to your total income for the year under consideration.
During the course of assessment proceedings, on perusal of the records it is noticed that you have received Rs.17,990/- as interest on fixed deposits from Bank of Baroda, Vallabhipur Branch but the same has not been offered for taxation in the return of income filed. Therefore, you are requested to show cause as to why the amount of Rs.17,990/- should not be treated as undisclosed interest income and added to your total income for the year under consideration.”
In response to the above show cause notice, the assessee has filed written submission before assessing officer, which is reproduced below: “In response to your above mentioned notice, we are hereby providing the details in case of Shri Mohanbhai Raghavbhai Beladiya as asked by good self. In this context we are submitting you the following details: - The Source and details related to opening balance of Cash: Rs.18,82,815/- 1.
Agriculture cultivation activity: The assessee is engaged in agriculture after getting maturity i.e. 22 Years and the age of assessee to the year of assessment is 73 years. Hence it appears that the assessee is engaged in agriculture cultivation since 51 years. The assessee is earning agriculture income and it is exempt from income tax and hence income tax return was not been filed by assessee. The agriculture land was also inherited from his father and other were been purchased by assessee.
2. Agriculture bills 1997-98 to 2009-10: We here by produce available agriculture bills from 1997-98 to 2009-10 and copy of pass book of Sayan Sahakari Mandli from 2005- 06 to 2011-12. Which shows that the assessee is enaged in agriclture acvivity and receiving income in cash for that years and the assesee has opned bank accounts in the F.Y. 2011-12 so the accumulated savings were been deposited to bank for purcahse of land.
ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya 3. Gift Received From Brother Mr. Ganeshbhai and Sister Mrs. Champaben Babubhai Gadhiya: The elder sister Mrs. Champaben Babubhai Gadhiya has gifted amount Rs. 2,00,000/- in the year 2005-06 (gift deed dated 30-03-2006) out of his accumulated savings and the elder brother of assessee Mr. Ganeshbhai Raghavbhai Beladiya has gifted a sum of Rs. 5,51,000/- in the year 2008-09 (gift deed dated 01-09-2008) out of his savings. The elder brother Mr. Gmeshbai has no child and hence he gifted all the accumulated savings to his brother Mr Mohanbhai (assessee) and the death certificate along with 7/12 is attached herewith. Hence, the assessee is engaged agriculture cultivation activity since last 51 years and the opening balance of cash is accumulated savings of the assessee from agriculture income and gift received from his brother & his sister and agriculture income was exempt from tax and so the income tax return was not been filed by assessee. So we hope that information and explanation provided herein above shall meet your requirements. However, if you require any further information or explanation in this behalf, we shall be pleased to provide the same on hearing from your end. Interest Income of Rs. 17,990/-: We here by inform to you that we have made deposits in the name of younger sister in the year of 1979 and such amount was been received as maintenance to her due to divorce and originally the amount was Rs. 30,000/- and the amount accumulated along with interest was withdrawn in the year 2012-13.”
However, the Assessing Officer rejected the contention of the assessee and observed that in respect of the opening cash balance of Rs.18,82,815/-, it was submitted that assessee is 73 years old and doing agricultural activities since many years. The assessee had received gifts from the family members in cash which are accumulated. However, in respect of agricultural income, the assessing officer observed that assessee has shown net agricultural income of Rs.1,28,000/- from Kaiyanpur land and Rs.1,87,815/- from Gothan land. The lands at Gothan were purchased during F.Y. 2006-07 & 2007-08. Therefore, before that assessee was having only land at Kaiyanpur having net agricultural income of Rs.1,28,000/- as per income shown in the year ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya under consideration. Therefore, after deducting house hold expenses, social responsibilities and other expenses there would hardly remain much for accumulated savings as claimed by the assessee.
In respect of gifts received in cash from family members, the assessing officer observed that assessee has furnished two gift deeds on stamp paper in support of his claim. In respect of gift received from Mrs. Champaben Babubhai Gadhiya, it was submitted that she is elder sister of assessee and has gifted Rs.2,00,000/- on 30.03.2006 to the assessee. However, on perusal of gift deed, it was noticed by the assessing officer that Champaben is not his elder sister but daughter of the assessee. Further, bank account statement or copy of return of income (ROI) filed by Mrs Champaben Babubhai Gadhiya has not been furnished. Therefore, creditworthiness of the donor is not proved. This gets support from the gift-deed itself wherein it is written that Champaben has given the gift from her savings from the 'Majuri karri' i.e. labour work.
In respect of gift of Rs.5,51,000/- received from brother Shri Ganeshbhai Beladiya, a copy of gift-deed dated 08.08.2008 and 7/12 of agricultural land held by him was furnished before the assessing officer. However, no any other proof showing accumulated savings of Rs.5,51,000/- has been furnished. Merely holding agricultural land and doing agricultural activities does not automatically endorse the huge cash on hand of Rs.5,51,000/-. Further, bank account statement or copy of ROI filed by Ganeshbhai has not been furnished. Therefore, creditworthiness of the donor is not proved. In view of the above, claim of gifts received in cash was accepted by the assessing officer.
ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya 11. In respect of investments made in cash during last 10 years by the assessee, the assessing officer observed that assessee has purchased lands at Gothan in FY 2006-07 & 2007-08 for investment of Rs.1,72,000/-. It was further observed by the assessing officer that assesses has purchased diamonds worth Rs.3,50,000/- in FY 2004-05 and Rs.3,75,000/- in FY 2007-08. Thus, assessee himself has bought the investment made in cash of Rs.9,00,000/- in last 8 years on records.
In view of the above facts, the assessing officer held that agricultural income, and claim of gifts were bogus therefore not accepted by the assessing officer. Considering the fact that investments made of by assessee to the tune of Rs.9,00,000/- in cash in last 8 years, the assessing officer accepted Rs.5,00,000/-, as opening cash in hand as on 01.04.2011. However, the differential amount of Rs.13,82,815/- (18,82,815 shown as opening cash – 5,00,000 accepted as opening cash by assessing officer) was treated as unexplained and therefore added to the total income of the assessee, as unexplained cash credits u/s 68 of the Income Tax Act for the year under consideration.
Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the action of the Assessing Officer. The ld CIT(A) observed that the assessee before the Assessing Officer, could not substantiate its claim of opening cash balance of Rs.18,82,815/-, whether it was from assessee`s previous years` income and gifts received from relatives. The Assessing Officer has allowed the claim of Rs.5,00,000/- as acceptable as opening cash on hand as on 01.04.2011, considering that the assessee is a senior citizen. And the differential amount of Rs.13,82,815/- (18,82,815 shown as opening cash – 5,00,000 accepted as opening cash by assessing officer) was treated as unexplained cash
ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya credits u/s 68 of the I.T. Act for the year under consideration. The assessee has claimed that the source of the cash balance is agricultural income. However, this claim of the assessee is not acceptable as the net agricultural income of the assessee is only Rs. 1,28,000/- from Kaiyanpur land and further, the assessee had purchased the lands at Gothan during F.Y. 2006-07 & 2007-08 for Rs.1,78,000/-. It is further noticed from above that assessee has purchased diamonds worth Rs.3,50,000/- in FY 2004-05 and Rs.3,75,000/- in FY 2007-08. However, these savings from the agricultural produce is not acceptable. Considering that the assessee also had the social responsibilities such like marriage of children, other social - religious ceremonies of his family and would have met expenses of medical treatment/sickness in a family member with his savings. Hence, after deducting house hold expenses, social responsibilities and other expenses there would hardly remain much for accumulate savings as claimed by the assessee. Further, with regard to the Gift deed of Rs.5,51,000/- of his elder brother (Mr. Ganeshbhai Mohanbhai Beladiya) the assessee has not produced any other proof showing accumulated savings of Rs.5,51,000/-. Merely, holding agricultural land and doing agricultural activities does not automatically endorse the huge cash on hand of Rs.5,51,000/-. Further, bank account statement or copy of ROI filed by Ganesh bhai has not been furnished. Further, regarding the gift deed of his daughter (Rs.2,00,000/- dated 30.03.2006. Further, bank account statement or copy of ROI filed by Mrs. Champaben Babubhai Gadhiya has not been furnished. Further, in the gift-deed itself, it is written that Champaben has given the gift from her savings from the 'Majuri karri' i.e. labour work. Therefore, creditworthiness of both the donors is not ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya proved. In view of the above, the ld CIT(A) confirmed the addition made by the Assessing Officer. 14. Aggrieved by the order of the ld. CIT(A), the assessee is in further appeal before us.
Ms Anchal Poddar, Learned Counsel for the assessee, stated that assessee has raised additional grounds of appeal, stating that notice under section 143(2) has not been issued on the assessee, during the assessment proceedings, therefore the entire assessment proceedings are invalid and hence assessment order itself may be quashed. For that Learned Counsel relied on the judgment of Hon'ble Supreme Court in the case of ACIT vs. M/s. Hotel Blue Moon, in Civil Appeal No.1198 of 2010, dated 02.02.2010.
On merits of the case, Ms. Poddar, further argued that assessee has adequate land and to prove the land ownership, the assessee has submitted 7/12 extract, bank statements, copies of the cotton bills, copies of sugar cane bills etc. Therefore, genuineness of the agricultural activities should not be doubted. Apart from this, the assessee has received gift from her daughter to the tune of Rs.2,00,000/- in cash, therefore considering these facts the assessee’s opening cash balance in the bank account was to the tune of Rs.18,82,815/-, and out of the said opening balance the Assessing Officer has accepted as correct opening balance to the extent of Rs.5,00,000/- and the balance amount of Rs.13,18,815/- was added in the hands of the assessee. The Learned Counsel submitted that the sources of the opening cash balance were gift received and accumulation of agricultural income. The Learned Counsel argued that assessee does not have any other sources of income other than the agricultural income. The Assessing Officer has not ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya proved the other sources of the assessee, other than the agricultural income, therefore the opening cash balance is out of gift received and the agricultural income.
Ms. Poddar, also argued that assessee is not maintaining books of accounts, therefore addition made by the Assessing Officer under section 68 of the Act is factual incorrect because section 68 of the Act says “if any amount found credited in the books of account”, therefore, addition made by the assessing officer under section 68 of the Act is not acceptable. The Learned Counsel also submitted that the opening cash balance is not a credit in the books of account as it is coming from the previous year, therefore the Assessing Officer should not have made addition under section 68 of the Act.
On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) for the Revenue, pleaded that the agricultural bills and documents submitted by the assessee does not contain the relevant details. The cotton bills and sugar cane bills submitted by assessee are self-made bills and vouchers and therefore should not be relied on these factitious documents. The Ld. Sr. DR also submitted that the daughter of the assessee, who is doing labour job and she is in a poor condition, cannot give gift/ donation to his father to Rs.2,00,000/-. Normally the father gives gift to his daughter and it is a reverse situation, besides the gift received from brother at Rs.5,51,000/- is also in the same nature and these gifts are kind of a bogus gifts to defraud the revenue.
About additional ground raised by the assessee, ld DR pleaded that it should not be admitted. The assessee has raised the additional ground of appeal stating “that notice under section 143(2) of the Act,
ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya has not been issued during the assessment proceedings” and ld DR stated that it should not be admitted, as the assessee has not raised this ground before the lower authorities (AO and CIT). The Ld. Sr. DR for the Revenue invited our attention towards section 292BB of the Act and stated that assessee has participated in the assessment proceedings, therefore this additional ground cannot be adjudicated at this stage.
I have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. I note that assessee has raised the additional ground on the legal issue challenging the validity of assessment proceedings stating that the notice under section 143(2) of the Act was not issued to the assessee. I have observed that the facts relating to non- issue of notice under section 143(2) were there before the assessing officer. I have considered the request of the assessee for admission of additional ground, which is purely of legal nature. On the basis of material available on record it is certain that additional ground raised by the assessee challenging the very jurisdiction of the assessing officer (AO) to pass assessment order is no longer res-Integra and it is well settled that an assessee can raise a legal ground at any stage of proceedings as held by the Hon`ble Apex Court in the case of CIT v/s. Varas Internation reported in 284 ITR 80(SC) and National Thermal Power Co Ltd. v/s CIT reported in 229 ITR 383 (SC) and Special Bench decision in the case of DHL Operators reported in 108 TTJ 152(SB). Keeping in view the facts and circumstances of the present case, I am of the view that the issue raised in ‘additional ground' regarding non-issue of notice u/s 143(2) of the Act, which goes to the ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya root of the matter needs to be admitted. Hence, I hereby allow the assessee to raise additional ground of appeal. Since this ground raises question about the assumption of jurisdiction and validity of assessment order itself, therefore, I thought it appropriate to take up and decide this additional ground first.
21. On verification of records it is clear that assessing officer has not issued notice under section 143(2) of the Act. However, ld DR for the Revenue, invited our attention towards section 292BB of the Act and stated that assessee has participated in the assessment proceedings, therefore this additional ground cannot be adjudicated at this stage. I do not agree with the arguments advanced by ld DR for the Revenue, as it is a settled position of law that an assessee can raise legal ground at any stage of proceedings. I note that Hon`ble Supreme Court in the case of ACIT v. Hotel Blue Moon 321 ITR 362(SC), held that it is necessary to issue notice under section 143(2) of the Act. I have noted the argument of the Ld. Counsel for the Assessee that assessing officer has not followed the mandatory procedure of assessment laid down under section 143(2) of the Act by not issuing notice u/s 143(2) of the Act. I note that for completing the assessment under section 148 of the Act, compliance with the procedure of issue of notice under Section 143 (2) was mandatory. It has been contended by ld DR that assessee attended the assessment proceedings regularly and never objected regarding issue and service of notice u/s143(2) so the default can be treated as procedural irregularity u/s 292BB of the Act. As per the provision of section 292BB where an assessee had appeared in any proceedings or cooperated in any enquiry relating to an assessment or re-assessment, it shall be deemed that any notice under any provision of this Act which is required to be served upon him, has been duly served upon him in time
ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya in accordance with the provision of this Act. The provision of section 292BB clearly laid down the circumstances/conditions under which the deeming fiction has to come into force. These conditions have been stated to be as (a), (b) and (c) which talks about the situation where: (a) notice was not served upon the assessee, (b) not served upon him in time, and (c) served upon him in an improper manner respectively. Therefore, section 292BB talks about only the situation where the assessee raises the issue of non-service of notice and still co-operates with the Department. The issuance of statutory notice cannot be dispensed with by the co-operation of the assessee. Since this notice 143(2) forms the basis for the Assessing Officer to assume jurisdiction under respective sections. To support this proposition, I rely on the decision of P & H High Court in the case of CIT v/s Cebon India Ltd (2012) 347 ITR 583 wherein it has been categorically held that absence of a statutory notice cannot be held to be curable u/s 292BB of the Act.
I note that a plain reading of section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under section 143(2) of the Act. The provisions contained in sub-section (2) of section 143 is mandatory and the legislature in their wisdom by using the word 'reason to believe' had cast a duty on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve, notice specifying particulars of such claim. In view of the above, after receipt of return in response to notice under Section 148, it shall be mandatory for the assessing officer to serve a notice under sub-Section (2) of Section 143 assigning reason therein. In absence of any notice issued under sub-section (2) of section 143 after receipt of fresh return submitted by the assessee in response to notice under section 148, the ITA.359/SRT/2023/AY.2012-13 Mohanbhai Raghavbhai Beladiya entire procedure adopted for escaped assessment, shall not be valid. Based on this legal position, I quash the reassessment order passed by the assessing officer under section 143(3) r.w.s. 147 of the Act and allow the appeal of the assessee.
Since I have quashed the reassessment proceedings and as the reassessment itself is quashed, all other issues on merits of the additions and other arguments of ld Counsel, in the impugned assessment proceedings, are rendered academic and infructuous, therefore do not require adjudication.
In the result, the appeal of the assessee is allowed in the terms indicated above. Order is pronounced on 16/08/2023 in the open court.