SARASWATI GAREWAL,BILASPUR vs INCOME TAX OFFICER, WARD 2(1), BILASPUR

Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR

आयकर अपीलीय अिधकरण, रायपुर �यायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR �ी र�वश सूद, �याियक सद�य एवं �ी अ�ण खोड़�पया, लेखा सद�य के सम� । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM (Assessment Year: 2013-14) Saraswati Garewal, V Income Tax Officer, Ward 2(1), C/o Shivbhajan, Vill: Pendridih, s Bilaspur Post: Hirri Mines, Bilaspur – 495222, (C.G.) PAN: BIZPG5287R (अपीलाथ� /Appellant) . (��यथ� / Respondent) . िनधा�रती क� ओर से /Assessee by Shri R.B. Doshi, CA राज�व क� ओर से /Revenue by : Shri Satya Prakash Sharma, Sr. DR सुनवाई क� तार�ख / Date of : 13/10/2023 Hearing घोषणाक� तार�ख/Date : 25/10/2023 of Pronouncement आदेश / O R D E R Per Arun Khodpia, AM:

The captioned appeal is directed against the order of Ld. CIT(A) dated 27/07/2022, for the AY 2013-14, which is arises out of the order of Ld. AO u/s 147 of the I.T. Act, 1961, dated 23/12/2019.

The grounds of appeal raised by the assessee in the present appeal are as under:

1. The order of the Ld. CIT(A) is bad in law and on facts.

2. The Ld. AO erred in issuing notice u/s 147 of the Act. The cash deposit in the bank does not mean escapement of income. 3. The Ld. AO erred in making additions u/s 69A of the Act.

The Ld. CIT (A) erred in sustaining addition of Rs. 940000/- u/s 69A of the I.T. Act, 1961.

The appellant reserves the right to add, alter and omit all or any of the grounds of appeal with the permissions of the Hon’ble appellant authority.

The brief facts of the case as stated are that the assessee in individual, in whose case reopening proceedings for the AY 2013-14, u/s 147 were initiated by the AO on account of case deposits of Rs.50 lakh in her saving bank account during the period from 01/04/2012 to 13/03/2013, for which notice u/s 148 of the I.T. Act, 1961 on 19/03/2019 was issued, but looking to no response from the assessee are reminder later was issued on 08/05/2019. Information was also called for u/s 133(6) from the branch manager of the concerned bank. Afterwards, in compliance to the notice u/s 148, the assessee has filed return of income electronically declaring total income of Rs. 1,72,570/- on 22/06/2019. Again, a notice u/s 142 of the Act was issued to the assessee on 23/09/2019 a/w a questioner pertaining to the issue raised under the reopening assessment proceedings. It is observed that the assessee has failed to comply with the notice of the department on or before the due date for compliance on 07/10/2019. A notice u/s 142(1) was issued on 21/10/2019 directing the assessee to submit the compliance towards the statutory notices issued earlier with a due date for compliance fixed on or before 31/10/2019, however, the assessee again failed to comply with the 142(1) a/w show cause notice have been issued to the assessee for non-compliance. The assessee submitted a reply with an attempt to explain the source of cash deposits, however, the response of the assessee was not found satisfactory so as to explain the nature and source of the cash deposit of Rs. 15 Lakh, accordingly, an addition of Rs. 15 lakh treating the same as unexplained cash deposit has been made u/s 69A of the Income Tax Act. Aggrieved thereby the assessee preferred an appeal before the Ld. CIT(A), wherein Ld. CIT has partly allowed the appeal of the assessee. Again, finding the observations of the Ld. CIT(A) bad in law and on facts, the assessee is in appeal before us with the grounds of appeal referred to supra.

4. At the very initiation of the hearing, Ld. AR of the assessee, referring to the ground No. 1 of the present appeal that the order passed by the Ld. CIT(A) is bad in law and on facts, have drawn our attention to ground No. 1 raised before the Ld. CIT(A), the same is extracted as under:

1. 1. That the order passed u/s 147 of the I.T. Act, is bad in law and on facts. a) that the Ld. AO fail to provide reasons recorded for the reopening of assessment u/s 147.

5. In the context of aforesaid ground observations of the Ld. CIT(A) were also shown before us, wherein Ld. CIT has rejected the contention of the assessee stating that the assessee has by and large been informed the issue at hand and she had been given adequate opportunities to defend her case, thus, as her rights to express and defend her case has been fully provided, that the appellant assessee has not initially responded to the AO notices, therefore, the relevant ground challenging the reopening is rejected. On such observations of the Ld. CIT(A) , Ld. AR has submitted before us that during the assessment proceedings, the assessee was kept deprived by not providing the reasons for reopening on the AR reasons, even after the assessee’s request vide her letter dated 11/07/2019, specifically requesting to issue copy of the reasons recorded and approval obtained for issuance of the notice u/s 148, finally after almost 5 months, closure to the date of culmination of the assessment on 06/12/2019 the Ld. AO have provided the extract of the reasons recorded but not the approval granted u/s 151 of the Act. In advancing the argument and in support of the contention that the assessee, Ld. AR placed reliance on the judgment in the case of Wimco Seedlings Ltd. vs. JCIT reported in (2020) 82 ITR (Trib) 0234 Delhi, wherein, coordinate bench of the ITAT relying on judgment in the case of Haryana Acrylic (308 ITR 38) has observed that when the complete reasons were not provided within reasonable time the re-assessment proceedings are held to be invalid.

Ld. AR also placed reliance on the judgment of the coordinate ‘SMC’ bench of ITAT Raipur, in the case of Gajraj Giri vs. I. T. Officer, in dated 06/09/2023, wherein similar issue has been delt with and decided as under:

11. I have given thoughtful consideration to the issue in hand and I am of the considered view that the failure of the A.O to make available to the assessee a copy of the “reasons to believe” that formed the basis for reopening his case goes to the very root of the validity of jurisdiction that he assumed for framing the impugned assessment. I say so for the reason that as the assessee, despite a specific request for a copy of the “reasons to believe” was not provided the same by the A.O, thus, had remained divested of his statutory right of objecting to the very basis on which his case was reopened under section 147 of the Act. As stated by the Ld. AR, and rightly so, as held by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO & Ors. (2003) 259 ITR 19 (SC), the assessee, after obtaining a copy of the “reasons to believe,” is vested with a statutory right to file his objections before the A.O., which the latter is required to dispose of based on a speaking 12 Gajraj Giri Vs. ITO, Ward-2(1), Bilaspur order. As in the case before me, there has been a complete violation of the applicable principle of law by the A.O, who had, despite a specific request by the assessee, failed to communicate the “reasons to believe” that had formed the very basis for reopening of his assessment u/s.147 of the Act; therefore, the very assumption of jurisdiction by him and framing of the impugned assessment cannot be sustained and is liable to be struck down on the said count itself. My view above is supported by the judgment of the Hon’ble High Court of Bombay in the case of Agarwal Metals and Alloys Vs. ACIT & Ors. (2012) 346 ITR 64 (Bom.). In its order mentioned above, the Hon’ble High Court had, after taking cognizance of the fact that the A.O in the case before them had failed to communicate the “reasons to believe” based on which the case of the assessee was reopened, quashed the assessment by treating the same as having been passed in a brazen violation of the governing principles of law. The relevant observations of the Hon’ble High Court are culled out as follows: “4. On these admitted facts, it is evident that there has been a complete violation of the applicable principles of law by the Assessing Officer. The Assessing Officer was required to communicate the reasons for reopening the assessment which he has failed to do. The Assessing Officer despite the judgment of the Supreme Court in GKN Driveshafts (India) Ltd., [2003] 259 ITR 19 (SC) has failed to provide an opportunity to the assessee to submit his objections to the reopening of the assessment. In the affidavit-in-reply, it has been submitted that the assessee was well aware of the reasons for the reopening of the assessment as the reasons were on the record for the assessment year 2007–08. This is clearly a specious explanation. According to counsel appearing on behalf of the Revenue, during the course of the assessment year 2007–08, it has been found that the petitioner has 13 Gajraj Giri Vs. ITO, Ward-2(1), Bilaspur been engaged in under invoicing and it is on that basis that the assessment for the assessment year 2004–05 is sought to be reopened. Even if the submission of the learned counsel were to be correct, reasons have to be communicated to the petitioner. There has admittedly been no communication of reasons to the petitioner. In these circumstances, we are inclined to quash and set aside the impugned order of assessment which has been passed in a brazen violation of the governing principles of law. However, in order to obviate the bar of limitation, we intend to incorporate a protective stay in order to enable the Assessing Officer to proceed further in accordance with law.” Also, a similar view had been taken by the Hon’ble High Court of Delhi in the case of Pr. CIT Vs. Jagat Talkies Distributors (2017) 85 taxmann.com 189 (Del.). In its order mentioned above, the Hon’ble High Court relied on the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Trend Electronics, ITA No.1867 of 2013, and held that on account of the failure of the A.O to make available to the assessee a copy of the reasons for reopening of the assessment u/s.147 of the Act, the re-assessment proceedings would stand vitiated in law. Accordingly, as in the case before me, the A.O despite the specific request of the assessee, had failed to provide him a copy of the reasons to believe based on which his case was reopened u/s.147 of the Act; therefore, as per the aforesaid settled position of law, the assessment framed by him being devoid and bereft of valid assumption of jurisdiction cannot be sustained and is herein quashed.

7. Ld. AR further drew our attention to the case law in the case of Tata Capital Financial Services Ltd. Vs. ACIT, writ petition no. 546 of 2022, wherein, Hon’ble Bombay High Court has categorically directed the revenue to adhere with certain guidelines. The Hon’ble Bombay High Court’s direction a/w observations qua providing the reasons to the assessee are extracted as under:

We are surprised to notice that paragraph no.3 in the actual reasons is missing in the letter dated 6th August, 2021. Paragraph no. 4 in the letter dated 6th August, 2021 is missing in the reasons given for obtaining approval.

If one considers paragraph no.3 of the actual reasons submitted for obtaining approval, which is missing in the letter of 6th August 2021, it clearly shows change of opinion. It also gives us an impression this omission was deliberate, being aware of the legal position. We are also surprised how the approval was also given after reading paragraph no.3 of the actual reasons.

following: In the circumstances, the Revenue is directed to adhere to the (a) While communicating the reasons for re-opening the assessment, a copy of the standard form/request sent by the Assessing Officer for obtaining approval of the Superior Officer should itself be provided to the assessee. This would contain comment or endorsement of the Superior Officer with his name, designation and date.

The Assessing Officer shall not merely state the reasons in the letter addressed to the assessee.

(b) If the reasons make reference to any other document or a letter or a report, such document or letter or report should be enclosed to the reasons. Such portion as it does not bear reference to the assessee concerned could be redacted.

(d) A personal hearing shall be given and minimum seven working days advance notice of such personal hearing shall be granted.

(e) If the Assessing Officer is going to rely on any judgment/order of any Tribunal or Court reference/ citation of these judgment/orders shall be provided alongwith notice for personal hearing so that the assessee will be able to deal with/distinguish these judgments/orders.

9. A copy of this order be placed before the members of the Central Board of Direct Taxes who shall issue guidelines to all its officers based on the directions given above with clear instructions that they shall be strictly followed. We only hope that, this will reduce the same errors being repeated by the concerned revenue authorities and will not drive the assessee to rush to the court. Thereby, the burden on the court will also get reduced.

8. Ld. Sr. DR on the other hand have strongly supported the order of the revenue authorities, however, after perusal of the assessment records, it is admitted that the copy of approval u/s 151 of the Act was not provided to the assessee as per the records.

We have considered the rival contentions, perused the material available on records and the case laws referred to. In the present case on perusal of the records and adverting to the contentions raised by the 06/12/2019 i.e., after almost 5 months from the date of request of the assessee copy of the reasons supplied to the assessee is extracted as under:

10.

On perusal of the aforesaid reasons supplied to the assessee and copy of the reasons recorded by the AO as per assessment records were found to be exactly the same, therefore, the case laws relied upon by the assessee that reasons were not provided or there was a difference in the reasons supplied and reasons recorded which were approved u/s 151 of the Act are of no help to the assessee, in deciding the assumption of valid jurisdiction u/s 147 of the Act. However, where the complete reasons were not provided to the assessee, instead only extract were provided i.e., also after expiry of a reasonable time, under such circumstances respectfully following the judgment in the case of Haryana Acrylic (supra) the assessment proceedings u/s 147 are liable to be held as bad in law. Further, the directions accorded by Hon’ble Mumbai High Court extracted here in above, accordingly, as per para 8(b) of the said order, it is incumbent upon the assessing officer to provide the assessee any other document or a letter or a report a/w the reasons recorded, which in the present case admittedly was not adhered to by the Ld. AO, since the copy of approval u/s 151 which has a reference to the reasons recorded and, thus, are to be mandatorily provided to the assessee, in absence of which the assumption of jurisdiction by the Ld. AO in initiating the proceedings u/s 147 was found to be invalid. Accordingly, the assessment order passed u/s 147, dehors the obedience of the settled position of law pertaining to compliance of the procedures is liable to be quashed, and we do so. In the result ground no. 1 of the assessee in terms of our aforesaid observations is allowed.

11.

As we have already decided ground no. 1 of the assessee in the present appeal, thereby quashing the assessment proceedings initiated u/s 147 of the I.T. Act. Therefore, all the other grounds of the appeal rendered as academic, thus, the same or not adjudicated.

12.

In the result appeal filed by the assessee is allowed.

Order pronounced in the court on 25/10/2023.

SARASWATI GAREWAL,BILASPUR vs. INCOME TAX OFFICER, WARD 2(1), BILASPUR