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Income Tax Appellate Tribunal, DELHI BENCH: SMC: NEW DELHI
Before: SHRI CHANDRA MOHAN GARG
ORDER PER CHANDRA MOHAN GARG, J.M. These appeals have been filed against the order of CIT(A)-6, New Delhi dated 28.03.2019 for AYs 2009-10 to 2011-12. The ld. representative of both the sides agreed that the facts and circumstances pertaining to all these captioned appeals are almost same. Therefore for the sake convenience and brevity, I am taking for AY 2009-10 as lead case. Application for condonation of delay in all three appeals.
2. The ld. assessee representative (AR) reiterating the condonation petition, supported by affidavit submitted that the assessee filed appeal before ld. CIT(A) on 25.11.2016 and the same was adjudicated on 28.03.2019 during pre-faceless period. The AR further submitted that the last date of hearing was physically attended by the AR on 13.03.2019 and till 03.09.2022 the assessee never received hard copy of first appellate order nor on the email addresses given in the Form no. 35 wherein email address of assessee was stated at banwarca@gmail.com and email address for communication was given rajkumarg_ca@yahoo.co.in. The ld. AR submitted that on being two email addresses the assessee never received soft copy of the order. On 03.09.2022 when the AR of assessee was updating his office records then he found that [2] to 2233/Del/2022 the first appellate order has not been received on the emails mentioned in the form no. 35 and on being asked the assessee also informed that the company has also not received hard copy of the first appellate order. The ld. counsel submitted that on the very same date after putting several efforts it was noticed that the order is available on the email as ornamentsmahalaxmi@gmail.com which was never given to the Department as email address for communication.
Placing reliance on the various judgement of Hon’ble Supreme Court in the case of N. Balakrishnan vs. M Krishnamurthy (1998) 70 Hon'ble Supreme Court 123 and order of ITAT Amritsar in ITA No. 57/Asr/2021 dated 01.03.2023 in the case of M. K Hotels & Resorts Ltd. vs. ACIT the ld. AR submitted that the coordinate bench of the Tribunal has condone delay of nine years on account of non-receipt of intimation resulted in to no action on the part of assessee. The AR submitted that the delay of 1202 days has been treated as properly explained and may kindly be condoned.
Replying to the above, the ld. Senior DR strongly opposed to the condonation of delay and filed written reply and report of the Assessing Officer and submitted that the factual report of Assessing Officer clearly reveals that the orders in all three appeals were sent to the address given in the assessment order and all three received back with the postal remark “left without address”. He further submitted that the soft copy of the orders was emailed to the assessee on ornamentsmahalaxmi@gmail.com on 01.04.2019 therefore this date has to be treated as the date of service of order on the assessee therefore delay should not be condoned.
On careful consideration of above submission at the very outset, from copy of form No. 35 we note that the assessee given two email addresses viz. email address of assessee was stated at banwarca@gmail.com and email address for communication was given as rajkumarg_ca@yahoo.co.in. The report of the Assessing Officer submitted before this bench vide dated 24.04.2023 reveals that the soft copy of orders was sent to the assessee on 01.04.2019 to the email address ornamentsmahalaxmi@gmail.com. Which was never given by the assessee to the Department for communication. So far as return of physical copy by postal authority is concerned it is not a case of the assessee that the hard copy was sent on wrong address.
In the case of Charan Singh University Vs. ITO in ITA No.6610/Del/2018 Dtd.02.09.21 (in Para-6) the Tribunal held as follows:- “We find that Hon'ble Supreme Court in the case of N. Balakrishnan us. M. Krishnamurthy (1998) 70 SCC 123 has held that as long as the conduct of the applicant does not, on the whole, warrant to castigate him as an irresponsible litigant, generally, the delay be condoned. It has further held that rules of limitation are not meant to [3] to 2233/Del/2022 destroy the right of parties but they are meant to see that parties do not resort to dilatory tactics. It has further held that in every case of delay there can be some lapse on the part of litigant concerned, however, that alone is not enough to turn down his plea and to shut the door against him. Further it is a settled law that in matters of condonation of delay, a highly pedantic approach should be eschewed and a justice oriented approach should be adopted and a party should not be made to suffer on account of technicalities. Before us, no material has been placed by Revenue to demonstrate that the delay in filing the appeal before CIT (A) by the assessee was due to some malafide intention on its part. In view of the aforesaid facts and in view of the well settled principle of natural justice that sufficient opportunity of hearing should be afforded to parties and no party should be condomned unheard, we are of the view that the delay in filing the appeal before CIT (A) needs to be condoned."
In the present case the report of the Assessing Officer relied by the ld. Senior DR shows that the physical copy of orders was returned back by the postal authorities and the soft copy was send to the email address which was not provided by the assessee to the Department and the same was also not mentioned as email address for communication in Form No.
As per assessee the orders came to his notice on 03.09.2022 and he filed appeals on 14.09.2022. In my considered view it is a settled law that in matters of condonation of delay, a highly pedantic approach should be eschewed and a justice oriented approach should be adopted and a party should not be made to suffer on account of technicalities. Before me, no material has been placed by Revenue to demonstrate that the delay in filing the appeal by the assessee was due to some malafide intention on its part. In view of the aforesaid facts and in view of the well settled principle of natural justice that sufficient opportunity of hearing should be afforded to parties and no party should be condoned unheard, I am of the view that the delay in filing the appeal needs to be condoned. Accordingly, applications seeking condonation of delay are allowed and appeals are admitted for hearing. Application for admission of additional grounds:- 8. In these applications assessee seeks to admit following additional grounds of appeal:- Additional Ground No.1 That under the facts, proceedings w/s.147/148 are unwarranted since initiated on the basis of information and documents found and seized in search of a 3rd party, from the material belonging to said 3rd party. At the most, the proceedings might be competent u/s.153C of the I.T. Act. Additional Ground No.2 That the reopening being done U/s. 147(b) as well as approval U/s.151(2) has been given for reopening U/s.147(b), which is a non-existent Sec., deleted w.e.f. 01.04.1989, [4] to 2233/Del/2022 therefore the reopening and approval Us.151(2) is absolutely illegal and unwarranted and needs to be quashed.
The learned AR placing reliance on the judgements of Hon’ble Supreme Court in the case of NTPC Ltd. 229 ITR 383 (SC) and CIT vs. Sinhgad Technical Education Society 397 ITR 344(SC) and judgment of Hon’ble jurisdictional High Court of Delhi in the case of Gedore Tools Pvt. Ltd. 238 ITR 268 (Del.) submitted that the issues raised in additional grounds goes to the root of the matter and facts and material required for adjudication of these grounds are already available on record therefore the same may kindly be admitted for adjudication. The ld. Senior DR strongly opposed to the admission of additional grounds. However, he did not controvert a factual position that these are legal grounds which goes to the root of the matter and can be adjudicated on basis of material available on record. On careful consideration of above submissions and perusal of the record and additional grounds I find that these are legal grounds based on the provisions of the Act and prepositions rendered by Hon’ble Supreme Court, Hon’ble jurisdictional High Court of Delhi and coordinate benches of the Tribunal. Therefore in the totality of the facts and circumstances additional grounds are admitted for hearing. Applications are allowed. Additional ground no. 1 10. Apropos this ground the ld. AR reiterated written submissions which are as follows:- Contention On Merits Of Ground The proceedings us.147/148 have been initiated on the basis of the information and material collected in search on S K Jain Group Hence it is a case which has been initiated on the basis of seized material in search u/s.132 on a 3rd party On reassessment on the basis of incriminating material found in search of a 3rd party, the provisions of Sec.153C are applicable which excludes the application of Sec.147 / 148 The scope of Sec. 147 / 148 vis-a-vis 153C are different Sec.147 is applicable where there is any information taken out from the seized material in search of a 3rd party while, Sec.153C is to be invoked where the reasstt. is proposed on the basis of incriminating material/documents found in search on a 3rd party Hence, on the basis of seized material, the impugned proceedings could had been initiated only u/s.153C and not u/s.147 / 148, hence whole proceedings are liable to be quashed [5] to 2233/Del/2022 CASE LAWS PCIT Vs. Abhisar Buildwell Pvt. Ltd. Civil Appeal No.6580/2021 (S.C.) Dtd.24.04.23 Pg.53/Para-11 ..However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfillment of the conditions mentioned in sections 147 / 148. Jasneet Kaur Chattwal Vs ITO - ITA No. 215/DEL/2016 Dtd. 23.03.23 (10-19 - CLC) It is A. Y.10-11. Under similar facts, coordinate bench Delhi vide order Dtd.23.03.23 has also held so. Delhi ITAT also relied upon case law in Vikram Manishwallal Bajaj (Supra) below:- Vikram Manishwarlal Bajaj vs ITO ITA No. 2552/Pun/2017 Dtd. 29.10.18 We hold that re-assessment proceedings initiated against the assessee under section 147 / 148 of the Act are not warranted. The Assessing Officer after receipt of information belonging to the assessee should have invoked provisions of section 153C of the Act and not section 147 / 148 of the Act. Accordingly, we hold so. Consequently, reassessment order passed under section 148 of the Act does not stand. The Assessing Officer is thus, directed to cancel the same.
Replying to the above the ld. Senior DR submitted that on the receipt of incriminating material and documents from the Assessing Officer of the searched person the Assessing Officer of other person has two options first he may proceed to invoke provision of section 153C of the Act or he can initiate action u/s. 147/ 148 of the Act for reopening of assessment. He further submitted that in the present case the Assessing Officer invoked later recourse and initiated reassessment proceedings which cannot be alleged as bad in law.
On careful consideration of above submission, from the copy of the reasons available at page 1 to 21 of assessee paper book it is clearly discernable that the Assessing Officer received information from the director of Income Tax (Inv.-II) New Delhi dated 12.03.2013 mentioning that a search operation was carried out in the case of Shri Surender Kumar Jain Group of cases and after intensive and extensive inquiry of documents seized during the course of search it has been noticed that said group is involved in providing accommodation entries to the persons listed in the report. The total facts mentioned in the reasons clearly reveals that the Assessing Officer took action u/s. 147/148 of the Act on the report of Investigation Wing and documents [6] to 2233/Del/2022 found and seized during the course of search and seizure operation on Surender Kumar Jain Group.
In the recent judgment in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. (supra) their Lordship held that in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfillment of the conditions mentioned in sections 147 / 148. At the cost of repetition I my point out that their Lordship in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. (supra) has drawn a clear distinction between two types of cases first where no incriminating material has been found and seized then the only remedy available to the revenue would be to initiate reassessment proceedings u/s. 147/148 of the Act, subject to fulfillment of condition mentioned therein and second where incriminating material and documents have been found and seized. In my humble understating in later situation the only valid action and recourse available to the Assessing Officer is to invoke provision of section 153C of the Act. This view also gets strong support from the orders of various coordinate benches of the Tribunal including order of ITAT Delhi Bench in the case of Saurashtra Color Tones P. Ltd. vs. ITO (supra).
In the present case, the assessments were completed/unabated on the date of receipt of information from the Investigation Wing on 12.03.2013 and documents/material was found and seized during the course of search and seizure operation therefore the only action to be taken by the Assessing Officer was available u/s. 153C of the Act and he was not entitle to invoke provisions of section 147/148 of the Act to initiate reassessment proceedings on the basis of material found and seized during the course of search and seizure operation on the third person. Therefore, there was no justification for the A.O. to have been initiated proceedings w/s.147 / 148 of the I.T. Act. The correct course of action would have been to proceed against the assessee under section 153C of the I.T. Act. Therefore initiation of reassessment proceedings w/s.147 / 148 of the I.T. Act is wholly invalid, void and bad in law. Accordingly, additional ground no. 1 is allowed.
Additional ground no.
Apropos this ground the ld. AR has submitted following written submissions:- Additional G. No. 2 & G.No.2 of Form-36 Approval Us.151 mechanical and fatally defective This issue has been taken in Form-36 by G.No.2 [7] to 2233/Del/2022 However specific contention that approval has been recorded under non-existent Sec.147(b) was not specifically addressed earlier, hence as a matter of abundant precaution it is taken as addl. ground also separately as under:- "That the reopening being done Us.147(b) as well as approval U/s.151(2) has been given for reopening U/s.147(b), which is a non-existent Sec., deleted w.e.f. 01.04.1989, therefore the reopening and approval Us.151(2) is absolutely illegal and unwarranted and needs to be quashed." Really speaking it is a contention in support of already taken ground, hence it may not be treated as addl. ground but cover in the originally taken ground Approval u/s.151 given for reopening " u/s.147(b) of the l.T. Act" Sec.147 (b) not in statute w.e.f. 01.04.89 Hence, approval us.151 for reopening is under non-existent Sec. Such approval is not maintainable in law Further, this shows approval without application of mind making approval unsustainable in law. CASE LAWS Smt. Kalpana Shantilal Hariya Vs. ACIT W.P. No.3063 / 2017 (Bom. HC) It is a direct authority on this issue. In this case approval u/s.151 was given by proposing reopening U/s.147(b). This Sec.147(b) was not in statute. A.O. issued letter to assessee mentioning invertent error and to treated as Sec.147. The Hon' ble Court held approval given on the basis of Sec. 147 is a case of non application of mind and mechanical approval. VRC Township Pvt. Ltd. Vs. ITO ITA. No.1503/Del./2017 Dtd.14.10.20 (Issue discussed in Para-6.1, findings in Para-6.4 of decision) In this case the proposal of reopening was us.147(b) which was approved us.151 as it is. Following the above mentioned Bom. HC decision, the reopening on the basis of such approval has been held invalid. Maheshwari Roller Flour Mills Pvt. Ltd. ITA No.4257/D/2019 Dtd.17.12.20 Following above cases, where approval is as u/s.147(b), held mechanical and without application of mind.
The ld. Senior DR strongly opposed to the above submissions and submitted that such kind of typographical mistakes are natural which does not make reassessment order and proceedings bad in law and the assessee is not eligible for any relief on this count.
[8] to 2233/Del/2022 17. On vigilant perusal of the approval u/s. 151(2) of the Act, available at page 33 to 35 of assessee paper book it is clearly discernable that in column no. 7 of form for recording the reasons for initiation of proceedings u/s. 148 of the Act the Assessing Officer while mentioning the applicable section stated section 147(b) of the I.T Act 1961 (for short the ‘Act’). The ld. PCIT has granted approval u/s. 151 of the Act on the same form. The provision of section 147(b) of the Act has been omitted and not in the statue with effect from 01.04.1989 hence I safely presume that the Assessing Officer at the time of initiating proceedings of reopening u/s 147 of the Act and issuing notice u/s. 148 of the Act did not applied his mind and simultaneously the ld. PCIT at the time of granting approval u/s. 151 of the Act also concurred with the Assessing Officer without application of mind to the reasons and other material forms etc. placed before him as basis of approval. The Hon’ble Bombay High Court in the case of Smt. Kalpana Shantilal Hariya Vs. ACIT W.P. No.3063 / 2017 (Bom. HC) held that In this case approval u/s.151 was given by proposing reopening U/s.147(b). This Sec.147(b) was not in statute. A.O. issued letter to assessee mentioning invertent error and to treated as Sec.147. The Hon' ble Court held approval given on the basis of Sec. 147 is a case of non application of mind and mechanical approval. Similar view has also been taken by the coordinate benches of the Tribunal in the orders in the cases of VRC Township Pvt. Ltd. Vs. ITO (supra) and Maheshwari Roller Flour Mills Pvt. Ltd. (supra) and it was held that in a case where the proposal for reopening was u/s. 147B of the Act which was approved u/s. 151 of the Act as it is then as per judgment of Hon’ble Bombay High in the case of Smt. Kalpana Shantilal Hariya Vs. ACIT (supra) the reopening on the basis of such approval without application of mind has to be held as invalid being bad in law.
Accordingly, in view of foregoing respectfully following the judgment of Hon’ble Bombay High Court in the case of Smt. Kalpana Shantilal Hariya Vs. ACIT (supra) and orders of co-ordinate benches of the Tribunal (supra) I am compelled to hold that the Assessing Officer initiated reassessment proceedings and issued notice u/s. 148 of the Act by mentioning applicable section as 147(b) of the Act which was not in existence in the book of statue at the time of recording reasons and the ld. PCIT also granted approval u/s. 151 of the Act on the said proposal of Assessing Officer. Therefore I safely hold that the authorities below have proceeded to initiate reassessment proceedings and notice u/s. 148 of the Act and also granting approval u/s. 151 of the Act, without application of mind and by mentioning in applicable and non-existent provision of the Act. Therefore initiation of reassessment proceedings and all consequent proceedings and orders including impugned reassessment order dated 21.10.2016 u/s. 143(3)/147 of the Act is invalid being bad in law and thus I quash the same. Accordingly, additional ground no. 2 of assessee is also allowed.
[9] to 2233/Del/2022 19. Since undisputedly facts and circumstances of assessment year 2010-11 and 2011-12 are identical and similar to the facts and circumstance of AY 2009-10 therefore my conclusion drawn for AY 2009-10 would apply mutatis mutandis to other two appeals pertaining to AY 2010-11 and 2011-12. Accordingly, additional ground no. 1 & 2 in the said two appeals are also allowed and initiation of reassessment proceedings u/s. 147/148 of the Act are quashed being invalid and bad in law.
The ld. representatives of both the side have not placed any submissions on the other grounds of assessee on legal as well as on merits therefore I don’t deem it fit to adjudicate the same in absence of any submissions and therefore the same are not being adjudicated and left open.
In the result, all three captioned appeals are allowed on legal grounds.