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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per:Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Commissioner of Income Tax (Appeals), NFAC, Delhi,[in brevity the ‘CIT (A)’],order passed u/s 250r.w.s. 254 of the Income Tax Act 1961, [in brevity ‘the Act’] for A.Y. 2014-15. The impugned order was emanated from the order of 2 Assessment Year: 2014-15 theld. Income Tax Officer, Ward-3, Phagwara, (in brevity “the AO”) u/s 143(3) of the Act.
The assessee has taken the following grounds: “
1 That the CIT(A] was not justified in sustaining the addition of Rs. 26230498 made by the AO on account of fictitious credits u/s 68/cessation of liability u/s 41(1) of the Income Tax Act 1961 by treating the sundry creditors namely Unique Traders as fictitious.
2. That the C1T(A) was not justified in sustaining the addition of Rs. 2443000 made by the AO on account of fictitious credits u/s 68/cessation of liability u/s 41(1) of the Income Tax Act 1961 by treating the sundry creditors namely B.L Seth Traders as fictitious.
3. That while sustaining the addition made by the AO the CIT(A) failed to appreciate explanations of assessee and the evidence filed by him before the CIT(A).
4. That the ITO and CIT(A) failed to appreciate that the liabilities were old and could not be treated as fictitious liabilities.
5. That the CIT(A) relied upon the statement made by the creditors without confronting the statement of the assessee and giving him opportunity to cross examine the creditors.
6. That also there is no case of cessation of liability by the ITO which could warrant any addition u/s 41(1). Further, ITO 3 Assessment Year: 2014-15 has nowhere invoked this section in the order while making the addition. 7 That the assessment order passed by the AO to whom the jurisdiction was transferred cannot be sustained in the absence of fresh notice issued u/s 143(2) of the Income Tax Act 1961. 8 That the orders of AO and CIT (A) are against the Law and facts of the case.”
3. Brief fact of the case is that during the assessment proceeding, the addition made u/s 68 r.w.s. 41(1) of the Act on unverified sundry creditors of the assessee. The assessee was carrying the balance of sundry creditors for A.Y. 2012-13.
During proceeding, the notice u/s 133(6) was issued for verification of sundry creditors. The ld. AO was being dissatisfied on unverified sundry creditors the addition was made amount to Rs.4,40,85,044/- with total income of the assessee U/s 68 of the Act. Aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) partly allowed the ground of the assessee. Being aggrieved,the assessee filed an appeal before us.
The ld. AR vehemently argued and has divided the arguments in two parts; one part is related to the merit and another part is related to the legal ground. The ld. AR further challenged that the ld. CIT(A) has not allowed the assessee to confronting the statement and opportunity to cross-examination with the creditors was denied, covered by ground no. 5 of the assessee’s appeal.
4 Assessment Year: 2014-15 The ld AR further argued that the notice was issued by the first assessing officer.After that the jurisdiction was changed u/s 129 of the Act. The newly assigned assessing officer had not issued the notice u/s 143(2). So, the entire assessment is void ab initio. 4.1 The ld. AR submitted the catena of judgment which are as follow: 4.1.1 In the ITAT- Guwahati Bench Balaji Enterprisev.Assistant Commissioner of Income Tax, Range-3, Guwahati, [2021] 124 taxmann.com 78 (Guwahati - Trib.). “However, case of assessee was then transferred from ITO, Shillong to Assessing Officer, Guwahati as assessee's principal place of business was at Guwahati and, thus, jurisdiction to assess lies with Income Tax Authorities at Guwahati - Assessing Officer, Guwahati framed assessment under section 143(3) - Assessee contended that Assessing Officer, Guwahati completed proceedings under section 143(3) without issuing fresh notice under section 143(2), thus, said assessment order was invalid - Whether impugned order under section 143(3) passed by Assessing Officer, Guwahati without issuing notice under section 143(2) and only in pursuance with notice issued by ITO, Shillong who did not enjoy jurisdiction over assessee was null and void and same was to be quashed - Held, yes”
4.1.2. In the ITAT Bangalore Bench 'C' Deputy Commissioner of Income-tax, Circle-1, Bellaryv.HothurMohamedIqbal, [2021] 131 taxmann.com 25 (Bangalore - Trib.)
5 Assessment Year: 2014-15 Section 143, read with section 127, of the Income-tax Act, 1961 - Assessment - General (Issue of notice u/s 143(2)) - Assessment year 2015-16 - Original jurisdiction of assessee was with ITO, Belgaum who issued notice under section 143(2) to assessee - Subsequently, case was transferred by ITO, Belgaum to ITO, Bellary and assessment was framed by ACIT, Bellary - Whether since notice under section 143(2) was issued to assessee by ITO, Belgaum but he was not concerned Assessing Officer of assessee and actual Assessing Officer was ITO, Bellary, thus, no valid notice under section 143(2) having issued by Assessing Officer who held jurisdiction over case of assessee; consequent order passed under section 143(3) was to be quashed and set aside - Held, yes”
4.1.3. In the ITAT Kolkata Bench 'B' Cosmat Traders (P.) Ltd.v.Income Tax Officer, Ward - (2), Kolkata, [2021] 128 taxmann.com 174 (Kolkata - Trib.) “13. Similarly, the Hon'ble Supreme Court in the case of CIT v. Laxman Das Khandelwal [2019] 108 taxmann.com 183/266 Taxman 171/417 ITR 325 (SC), held as follows:— "7. A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the 6 Assessment Year: 2014-15 proceedings, the provisions of Section 292BB would be a complete answer. On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.
The law on the point as regards applicability of the requirement of notice under section 143(2) of the Act is quite clear from the decision in Hotel Blue Moon's case (supra). The issue that however needs to be considered is the impact of Section 292BB of the Act."
Applying the propositions of law laid down in the above case-law to the facts of the case on hand, we have to necessarily hold that the passing of assessment order u/s 144 of the Act, without issuing notice u/s 143(2) of the Act, by the Assessing Officer having jurisdiction over this assessee, is bad in law and has to be quashed. As we have quashed the assessment itself on the grounds of jurisdiction, we do not consider the other issues raised by the assessee as it would be an academic exercise.
In the result, appeal of the assessee is allowed.”
7 Assessment Year: 2014-15 5. The ld. DR vehemently argued and fully relied on the order of the revenue authorities.
We heard the rival submission and considered the documents available in the record. By perusal of the documents we find that the legal issue related to issuance of notice u/s 143(2) was first time agitated before the bench by the assessee. This issue is raised as the additional ground is purely legal in nature though in the absence of this issueraised before the authorities below no verification or enquiry was conducted by the authorities below specifically in the contest of the legal issue Accordingly, in the facts and circumstances of the case and in view of the decision of Hon'ble Supreme Court in case of NTPC Ltd. v. CIT [1998] 229 ITR 383 the additional ground raised by the assessee is admitted for consideration and adjudication. We find that the legal issue first to be ascertained to determination the jurisdiction of the assessing authority to pass the assessment order. We are, therefore, of the opinion that interest of justice would be sub served if the impugned order is set aside and the matters are remitted back to the ld. CIT(A) for consideration thereof afresh. We are not expressing any views on the merits of the case so as to limit the appellate procedure before the Ld. CIT(A). Needless to say, the assessee should get
8 Assessment Year: 2014-15 a reasonable opportunity of hearing for setting aside proceedings. The discussion on the merit of the case is only remained for academic purpose.
In the result, the appeal of the assessee bearing is allowed for statistical purposes. Order pronounced in the open court on 17.07.2023