Case Law Details
Hillman Hosiery Mills Pvt. Ltd. Vs DCIT (ITAT Kolkata)
The appeal before the Income Tax Appellate Tribunal, Kolkata Bench, arose from the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2013-14. The assessee had filed its return declaring total income of Rs. 39,41,690. During assessment under section 143(3), the Assessing Officer made an addition of Rs. 5.40 crore as unexplained cash credits under section 68 in respect of unsecured loans received from 32 parties and also disallowed interest of Rs. 44,65,805 relating to those loans. The Commissioner (Appeals) upheld the assessment, following which the assessee filed an appeal before the Tribunal.
In addition to challenging the additions on merits, the assessee raised additional legal grounds contending that the Assessing Officer who issued the notice under section 143(2) did not have jurisdiction over the case and that the Assessing Officer who ultimately completed the assessment had not issued any notice under section 143(2). The Tribunal admitted these additional grounds, observing that they were purely legal issues not requiring further investigation into facts.
On the jurisdictional issue, the assessee submitted that the notice under section 143(2) had been issued by the Income Tax Officer, Ward-3(3), Kolkata. After objections regarding jurisdiction, the file was transferred to the Deputy Commissioner of Income Tax, Circle-11(1), Kolkata, who completed the assessment under section 143(3). According to the assessee, the jurisdictional Assessing Officer never issued a notice under section 143(2). Alternatively, if the Income Tax Officer was considered the jurisdictional officer, then the assessment made by the Deputy Commissioner was without jurisdiction.
On merits, the assessee argued that it had substantial opening balances of unsecured loans and that, during the relevant year, additional loans were received from both existing and new creditors. It submitted that many earlier loans had been repaid and produced extensive documentary evidence to establish the identity, creditworthiness and genuineness of the loan transactions. The documents included certificates of incorporation, income-tax returns, audited financial statements, tax audit reports, bank statements showing banking channel transactions, confirmations from creditors and evidence of repayments wherever applicable. The assessee also pointed out that notices issued under section 133(6) to various creditors had been served and replies were received directly by the Assessing Officer. A paper book containing over one thousand pages of supporting documents was also filed.
The Revenue argued that the statutory notice under section 143(2) had been issued before scrutiny proceedings commenced and that there was no requirement for the Deputy Commissioner to issue another notice after transfer of jurisdiction. On the merits, it contended that several lending companies could not be found at their stated addresses, only 22 out of 32 parties responded to notices, and many creditor companies had meagre income, making their creditworthiness doubtful. It therefore supported the findings of the Assessing Officer and the Commissioner (Appeals).
The Tribunal examined the chronology of events and noted that the notice under section 143(2) had been issued by the Income Tax Officer, while the assessment was completed by the Deputy Commissioner, who had not issued any notice under section 143(2). The Tribunal observed that the issue had already been considered in earlier decisions under similar circumstances and referred to its previous rulings and judicial precedents. It also referred to the Supreme Court decision explaining that section 292BB cures defects in service of notice but does not cure the complete absence of a statutory notice.
Following the earlier decisions, the Tribunal held that the assessment order was bad in law because the Assessing Officer having jurisdiction over the assessee had not issued the mandatory notice under section 143(2). It further held that a notice issued by an officer having no jurisdiction was null and void and that section 292BB did not apply in such circumstances. Since the assessment itself was held to be invalid on the jurisdictional ground, the Tribunal did not consider it necessary to adjudicate the merits relating to the addition under section 68 and the disallowance of interest. Accordingly, the appeal of the assessee was allowed on the legal ground.
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