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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. Pr. Commissioner of Income Tax-1,Amritsar,[in brevity ‘the PCIT’] order passed u/s 263of the Income Tax Act 1961, [in brevity ‘the Act’] for A.Y. 2011-12.
The appeal was filed with delay of 334 days. The ld. AR placed that the delay which was duly covered with an order of the Hon’ble Supreme Court in Suo Motu Writ Petition (C) NO. 3 Of2020 date of order 10/01/2022 considering the Covid Pandemic. Accordingly, the delay was extended till 28.02.2022 by the order of Hon’ble Apex Court. The ld. DR had not made any objection against the submission of the ld. AR. Accordingly, the delay of 334 days is condoned.
The assessee has taken the following grounds: “
1. That on the facts and in the circumstances of the case and in law, the learned Pr. CIT, Bathinda erred in revising the assessment order Dated 14.12.2018 passed by the AO, Ward 3(3), Faridkot which was neither erroneous nor prejudicial to interest of revenue.
2. That on the facts and in the circumstances of the case and in law, the learned Pr.CIT erred in initiating the proceedings u/s 263 on the receipt of proposal from AO, Ward 3(3), Faridkot through Additional CIT', Range I, Bathinda. The letter of the AO, Ward 3(3), Faridkot is not the record of any proceedings under the Income tax Act, 1961. As per law, the letter of the AO recommending a revision to the Pr. CIT has no statutory sanction as per the provisions ot section 263 and accordingly is a course of action unknown to the law. The AO cannot usurp the power of Pr. CIT and recommend a revision u/s 263 of the Act.
3. That on the facts and in the circumstances of the case and in law and as per theprovisions of section 263, the Pr. CIT should have suo motto called for and examined the record of the assessment proceedings and thereafter should have given a finding that the assessment order as erroneous or prejudicial to the interest of Revenue. So, the revision order is liable to be quashed.
4. That on the facts and in the circumstances of the case and in law, the learned Pr.CIT, Amritsar erred in delegating his powers to ITO, Ward, Gurdaspur for initiating the 263 proceedings through notice Dated 02.03.20.21 as he has neither territorial nor pecuniary jurisdiction over the assessee. So the revision order is without jurisdiction and is liable to be quashed.
5. That on the facts and in the circumstances of the case and in law, the learned Pr.CIT erred in treating a brief order passed without detail by the AO that the AO acted erroneously as the AO has passed the brief assessment order after seeing the assessment record and with application of his mind and alter taking a plausible view. An enquiry made by the AO, considered by the Pr. CIT as inadequate, cannot make the assessment order erroneous. A brief order without details cannot be termed that the AO acted erroneously. So, the revision order is liable to be quashed.
6. That the assessee has filed the return of income in response tonotice u/s 148 on10.11.2018 at Rs. 319270/- and the same was duly considered while framing assessment. The deduction u/s 54 was claimed in this return and facts were on file at the time of making re-assessment. So, if the AO has not made any enquiry ormentioned anything about the same in assessment it does not amount to re-assessment order erroneous or prejudicial to the interest of revenue; Making no addition on particular claim made by assessee in his return of income when all the facts were on file cannot render the order erroneous. It is also clear that the AO passed the assessment order with the application of mind. So, the revision order is liable to be quashed.
7. That on the facts and in the circumstances of the case and in law. the learned Pr. CIT, Amritsar lias not given the reasonable opportunity to defend the case, to the assessee. Even the reply filed is not considered. So, revisional order is liable to be quashed.
8. That any other relief may kindly be granted to the assessee to whom she is found entitled at the time of hearing of appeal.”
Brief fact of the case is that the assessment was completed u/s 143(3) r.w.s. 147 of the Act. The ld. PCIT issued notice u/s 263 by calling the assessment order erroneous and prejudicial to the interest of revenue. On the ground that the ld. AO had not taken proper verification of cash deposit amount of Rs.18,17,000/-. As the source of cash was incidental and related to sale of land, the taxability of capital gain. So, theissuewas needed to be investigated. The assessee has claimed exemption u/s 54 amounting to Rs.22,84,849/-. The grievance of the ld. PCIT that the ld. AO had not raised any query to verify the genuineness of the exemption claimed nor verify as to whether the pre-requisite required being eligible for exemption u/s 54 has been met. Accordingly, the order u/s 263 was passed in setting aside to the assessment order for further verification. Being aggrieved order passed by the ld. PCIT, assessee filed an appeal before us.
The ld. AR filed written submissions which is kept in the record. The ld. AR argued first in ground no. 4 related to issuance of notice u/s 263. The ld. AR invited our attention in APB pages 1 to 2 the notice dated 02.03.2021 which was issued by the ITO- Ward, Gurdaspur to initiate the proceeding u/s 263. The notice u/s 263 dated 02.03.2021 is duly reproduced as below:
5.1 The ld. AR further placed that the entire proceeding u/s 263 is bad in law due to the initiation of the notice by the ITO who is below the rank of the PCIT. The ld. AR respectfully relied on the order of the Hon’ble High Court of Bombay in the case of CIT vs. Alcon Resort Holdings Ltd. 448 ITR 127 (Bom.) / [2022] 139 taxmann.com 310 (Bombay). The relevant paragraphs are extracted as below:-
12. In Sahni Silk Mills (P.) Ltd. (supra), the Supreme Court was considering the legality of resolution empowering the Director General to authorize any other Officer to exercise his powers. The Court found that in the absence of enabling provision, such delegation would not be permissible and that the legislature can permit any statutory authority to delegate its power to any other authority after such a policy is indicated in the statute itself and when parliament has specifically appointed an authority to discharge a function, it cannot be readily presumed that it had intended that its delegate should be free to empower another person to act in his place. The Court cited with approval the case of Barium Chemicals Ltd. v. Company Law Board AIR 1967 SC 295 and quoted the following paragraph:
Bearing in mind that the maxim delegatus non protest delegarsets out what is merely a rule of construction, sub-delegation can be sustained if permitted by express provision or by necessary implication."
In the instant case, nothing has been shown to us whereby the Assistant Commissioner was empowered to act in place of the Commissioner under section 21 of the ET Act. 14.Lalitkumar Bardia (supra) considered section 2(7A) of the Income-tax Act and the meaning of the expression "Assessing Officer" and found that the DCIT, Nagpur, did not have jurisdiction over the Respondent-Assessee by virtue of section 120 of the Act and it is the Assessing Officer alone who was to serve notice calling upon the assessee to furnish a return in terms of Section 158 BC. The notice issued by the DICT was bad since on the date the notice was issued, he was not the Assessing Officer. The Division Bench held that as a consequence the notice issued by the DCIT and all proceedings subsequent thereto were without authority of law. 15.Lalitkumar Bardia (supra), also made reference to Asstt. CIT v. Hotel Blue Moon [2010] 188 Taxman 113/321 ITR 362 (SC), that the notice under section 158 BC was mandatory and the very foundation of jurisdiction and had necessarily to be issued by the Assessing Officer and not by any Officer of the Income Tax Department. As we can see from the aforesaid decisions, an Officer superior in rank to the Assessing Officer was found to have no jurisdiction to issue the notice in question. Applying these principles at the case at hand, we have no hesitation in concluding that the Assistant Commissioner could not have issued the notice in the instant case.
In the above view, the substantial question of law as framed herein above at (A) is answered in the affirmative and the substantial question of law at (D) is answered in negative i.e. in favour of the respondent/assessee and against the Revenue.” (Emphasis supplied)
5.2. The ld AR further argued and respectfully relied on High Court of Madhya Pradesh, Commissioner of Income-taxv.Sattamdas Mohandas Sidhi[1998] 96 TAXMAN 263 (MP). The relevant paragraph is extracted as below: - Notice by way of telegram cannot be said to be substituted for a notice by a post. Section 282 contemplates by two modes either by post or by way of summons issued by the Court under the Civil Procedure Code. This view has been taken by this Court in the case of Umashankar Mishra (supra) and in that case, even an order of penalty was set aside as it was found that the notices were not sent as required under order 5 rule 1(3) of the Code of Civil Procedure. Similarly, in the case of B.K. Gooyee (supra) , the Calcutta High Court has also taken same view that the irregularity of serving a notice under section 34 of the Act, cannot be waived by the assessee or his counsel as the irregularity is not one of a merely procedural nature, and service of a valid notice is necessary to invest the ITO with jurisdiction to take proceedings under the section. Therefore, so far as the service of notice under section 282 is concerned, it is mandatory, and it has to be in the manner provide under the Act and no other way. Secondly, notice under section 263 requires that a reason for exercising a revisional jurisdiction has to be mentioned in the notice. The telegram which was sent by the assessee did not contain any reason except directing him to appear before that authority, that was also misconceived. Their Lordships of the Calcutta High Court in the case of ITC v. G.T. Agencies [1973] ITR 1383 have taken the view that a show- cause notice issued by Commissioner did not fairly indicate the grounds used by him or ordering cancellation of the firm's registration and for cancellation of assessments made by the ITO. It was also held that the assessee was deprived of fair opportunity to show cause against proposed action. The Tribunal was, thus, justified in reversing the Commissioner's order. Their Lordships have made a reference of a decision of Hon. Supreme Court in the case of Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 . Similar view has been taken by the Orissa High Court in the matter of sales tax in the case of Rawani Dal & Flour Mills v. CST [1992] 86 STC 409 and under Orissa sales tax Act, the Commissioner issued notice exercising his revisional jurisdiction without giving reasons in notice. Their Lordships held that the notice should contain the reasons so as to give an opportunity to assessee and in absence of that, notice is bad.
Hence, we are of the opinion that the view taken by the Tribunal is quite right and we, accordingly, answer both the aforesaid questions against the revenue and favour of the assessee. This reference is, accordingly, answered.”
The ld. DR vehemently argued and relied on the order of the lower authorities.
We heard the rival submissionand relied on the documents available in the record. The notice U/s 263 was issued by the ITO as per direction of the ld. PCIT.
The notice was issued by the ITO who is below the rank of ld. PCIT. The ITO has no power to initiate the notice u/s 263 which vitiated the entire proceeding of section 263. The statute never permitted in section 263 for delegation of power to the authority below for issuance of notice for initiation of proceedings. We respectfully relied on the caseAlcon Resort Holdings Ltd, (supra). We fully relied on the maxim delegatus non protest delegarsets. The delegation if possible if permitted by the law. The ld. DR was unable to place any judgment against the submission of assessee. Accordingly, the notice issued U/s 263 is invalid. The order passed by the ld. PCIT is void and liable to be quashed.
Considering the above discussion the Ground No 4 of assessee’s appeal is allowed. Rest of the grounds are only remained for academic purpose.
In the result, the appeal of the assessee bearing is allowed.