Hari Industries Vs ITO (ITAT Delhi)
Summary: ITAT Delhi partly allowed for statistical purposes the appeal of Shri Hari Industries for Assessment Year 2017-18 and remitted the dispute concerning addition of Rs.75,33,414/- under section 69A read with section 115BBE of the Income Tax Act, 1961 to the CIT(A) for de novo adjudication. The Revenue had information that the assessee deposited Rs.17,19,000/- in its State Bank of Patiyala account during the demonetization period and had not filed its return for AY 2017-18. Notice under section 142(1) dated 22.02.2018 remained un-complied with and the Assessing Officer consequently completed a best judgment assessment under section 144. The AO ultimately treated total bank credits/deposits of Rs.75,33,414/- as unexplained money under section 69A read with section 115BBE. The CIT(A) confirmed the assessment ex parte.
The assessee raised additional grounds contending that the assessment ought to have been made under section 147 instead of section 144 and that the show-cause notice dated 08.12.2019 was unsigned. The Tribunal rejected both grounds. It found that notice under section 142(1) had been issued because the assessee had not filed its return and cash deposits had been noticed, and section 144 was invoked because the assessee failed to comply with that notice. As regards the alleged unsigned notice, the Tribunal found that the last page of the combined composite communication bore the AO’s digital signature. The Tribunal also rejected grounds alleging that notice under section 144(1) was time-barred and that approval of JCIT/Addl. CIT had not been obtained, since nothing was placed on record in support of those arguments.
The assessee further challenged the jurisdiction of ITO Ward-36(8), contending that notices had been issued by ITO Ward-39(5) and that no transfer order under section 127 had been passed. The Revenue explained that this resulted from restructuring of jurisdiction in Delhi under CBDT Notification No.50/2014 dated 22.10.2014, whereby the erstwhile charge of PCIT-13 was merged with PCIT-12 and cases of Ward-39(5) were relocated to Ward-36(8). ITAT accepted that this was restructuring rather than a transfer under section 127 and also accepted the Revenue’s submission that section 127 orders were not required for intra-city transfers. The jurisdictional grounds were accordingly dismissed. The Tribunal also rejected the assessee’s ground concerning service of notices on an erstwhile partner because no evidence was placed on record showing that the changed partnership deed and new communication details had been supplied to the lower authorities.
On the merits of the section 69A/115BBE addition, however, the Tribunal found that the CIT(A) had dismissed the assessee’s appeal in a “casual, summary and cryptic manner” and had not adequately considered the averments in Form 35. ITAT held that improper adjudication had clearly been made out. In the interest of justice, it set aside the CIT(A)’s order and directed de novo adjudication in accordance with law after giving the assessee due opportunity of hearing and passing a speaking order. The Revenue authorities were directed to ensure adequate and timely access to the Income Tax Portal so that the assessee could file its submissions. The CIT(A) was specifically directed to consider the Madras High Court decision in S.M.I.L.E Microfinance Ltd. concerning invocation of section 115BBE for the assessment year under consideration. Grounds 7 to 9 were therefore allowed for statistical purposes, and the appeal was partly allowed for statistical purposes.
Cases Discussed
- S.M.I.L.E Microfinance Ltd. in W.P.(MD)No. 2078 of 2020 and W.M.P.(MD)No. 1742 of 2020, dated 19.11.2024
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, New Delhi, dated 22.07.2024 arising out of assessment order dated 14.12.2019 passed under section u/s 144 of the Act for the Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
1. The Hon.CIT (A)-NFAC has erred in law and on facts in sustaining addition of Rs. 75, 33,414/- an un-tenable and an illegal ground. Hence the addition, as such, may be deleted.
2. The Hon.CIT (A)-NFAC has erred in law and on facts in sustaining the addition of Rs.75, 33,414/- as notice Issued u/s 144(1) Is time barred. Hence the assessment order, as such, may be vacated.
3. The Hon.CIT (A)-NFAC has erred in law and on facts in sustaining addition of Rs. 58, 14.414/- as no permission from JCIT/ Additional CIT has been taken by the Ld. AO. Hence the assessment Is bad and as such may be vacated
4. The Hon.CIT (A)-NFAC has erred in law and on facts in sustaining the assessment as the Ld. AO. ITO ward 36(8) has no jurisdiction to assess the case. Hence the assessment, il5 such, may be quashed.
5. The Hon.CIT (A)-NFAC has erred in law and on facts in sustaining the assessment as ITO Ward ITO Ward, 36(8) Is not competent person for passing the assessment order in the case of the assessee and Hence, the assessment order may be quashed.
6. The Hon.CIT (A)-NFAC has erred in law and on facts in sustaining the assessment as no notice have been served during assessment proceeding. Hence the assessment is bad as such and may be quashed.
7. The Hon.CIT (A)-NFAC has erred In law and on facts in sustaining the addition at Rs.17,19,000/-as no sufficient opportunity has been provided to the assessee. Hence the assessment is bad and as such may be quashed.
8. The Hon.CIT (A)-NFAC has erred ln law and on facts in sustaining the addition of Rs.75,33,414/- u/s 69A read with 11SBBE of the income tax act on untenable and Illegal grounds. Hence the assessment is bad and as such may be deleted.
9. That Hon.CIT (A)-NFAC has erred in facts and law in sustain the addition of Rs.58,14,414/- as It Is beyond the jurisdiction of selection of case under limited scrutiny. Hence, the addition as such may be deleted.
3. During the course of hearing, the ld. Counsel drew our attention to its additional grounds of appeal filed as under. It was requested that as the same strike at the root of the matter, the same be heard in preference to other grounds of appeal.
1. That the assessment order is bad in law and on facts as done under section 144 instead of 147 of the Income Tax Act. Hence, the assessment, as such, may be quashed.
2. That the assessment order is bad in law and on facts as show cause notice dated 08.12.2019 is unsigned. Hence, the assessment as such may be quashed.
4. Brief facts of the case are that the revenue was in possession of information that the appellant had deposited cash during the demonetization period of Rs.17,19,000/- in its bank account maintained with State Bank of Patiyala. No Return of Income for AY 2017-18 was filed. The ld. Assessing Officer issued notice u/s 142(1) dated 22.02.2018, which remained un-complied. In the absence of requisite replies coming from the assessee, order u/s 144 as best judgment assessment passed by the ld. Assessing Officer. Para-3 of the assessment order clearly alludes that the ld. Assessing Officer had obtained necessary directions from his range head u/s 144A of the Act. In the absence of any reply coming from the assessee, the ld. Assessing Officer proceeded to add the total cash deposits of Rs.75,33,414/- in the hands of the assessee u/s 69A r.w.s. 115BBE of the Act. The ld. CIT(A) confirmed the order of the ld. Assessing Officer ex-parte on account of non-compliance to his statutory notice by observing as under:-
“..2. Ground Number.1 object to the addition of Rs.75,33,414/- including cash deposits during the demonetization period during the F.Y.2016-17. Therefore, considering the above legal position and the facts and circumstances of the case, it is established that the assessee has deposited the cash of Rs.52,19,000/- in his/her above mentioned bank accounts) out of its “unexplained money” during the previous year 2016-17 relevant to the Assessment Year 2017-18.
Further, the assessee has failed tol furnish any explanation regarding the source of other credits/deposits of Rs.23,14,414l- appearing in his bank accounts [as mentioned above] during the F.Y.2016-17 relevant to the A.Y.2017-18. Therefore, the assessee is found to be the owner of the money and which was deposited by it in cash or credited through other means/non-cash transactions in his account during the year in respect of which the assessee has not furnished/filed any explanation about the nature and source of acquisition of said money. Accordingly, the entire credits/deposits appearing in the above mentioned bank accounts of the assessee aggregating to Rs.75,33,414/- [including the cash deposits of Rs.52,19,000/- is treated as unexplained money and this therefore, deemed as income of the assessee u/s 69A of the IT Act, 1961 for the previous year 2016-17 relevant to the A. Y.2017-18. Since, the addition in respect of this income is made on account of unexplained money u/s 69A of Income Tax Act, 1961, the said income is liable to higher tax rate as provided u/s 115BBE of the Act and accordingly the income tax on this income shall be payable on the rate as per Section 115BBE of the Act.
3.The The assessment of u/s 69A is confirmed…”
5. The ld. Counsel also drew our attention to its petition for filing of additional evidences under Rule-29. Through the impugned petition, the ld. Counsel has submitted that the partnership firm was created on 18.09.2006 with Shri Sanjay Anand, Shri S.K. Gupta and Shri Anil Kumar. It was argued that there was reconstitution in the firm and Shri S.K. Gupta and Shri Anil Kumar retired from the firm and Shri Ravi Das, father of Shri Sanjay Anand was admitted to the firm w.e.f. 04.10.2017. It was contended that the statutory notices of the Assessing Officer were sent through email/physical address delivery to Shri S.K. Gupta, the erstwhile partner. It was argued that the assessee consequently could not get the said notices. It was also submitted that Shri Sanjay Anand was suffering from depression problem and hence could not pursue the proceedings before the revenue authorities. Reportedly, Shri Sanjay Anand died on 19.09.2021 leading to dissolution of the firm. His father also did not had any clue about pending proceedings by the ld. First Appellate Authority. In support of its petition, confirmations/bank statements of parties, death certificate of Shri Sanjay Anand, partnership deed including restructured partnership deed, etc was filed.
6. We have noted that through the additional ground of appeal no.1, the appellant has contested that the assessment order deserves to be quashed as passed u/s 144 and not u/s 147. The ground raised by the assessee has been found to be untenable as the ld. Assessing Officer has issued notice u/s 142(1) dated 22.02.2018 since the assessee was found not to have filed its Return of Income and was simultaneously noted to have deposited cash in its bank account. The order u/s 144 was passed since the assessee had not complied with notices issued u/s 142(1) of the Act. Accordingly, the additional ground of appeal no.1 is dismissed.
7. The additional ground of appeal no.2 raised by the appellant is regarding the show-cause notice dated 08.12.2019 being invalid on account of being unsigned. The impugned notice has been perused, copies of which is placed on pages 49 to 56 of the paper book. We have noted that on page-56 of the paper book being the last page of the combined composite communication dated 18.11.2019 bears digital signature of the ld. Assessing Officer. Accordingly, the additional ground of appeal no.2 is dismissed.
8. Through the main grounds of appeal nos.1 to 3, the appellant assessee has contested that the assessment order is invalid as notice u/s 144(1) was time barred, approval of JCIT/Addl. CIT was not obtained prior to passing of order. Nothing has been placed on records in furtherance of these arguments and the same are therefore dismissed as in fructuous.
9. Through grounds of appeal no.4 and 5, the appellant has contested that the assessment order was passed by ITO, Ward-36(8). It was argued that notices were issued by ITO, Ward-39(5) and consequently the assessment order by ITO, Ward-36(8) was invalid. It was argued that no transfer orders were passed u/s 127 of the Act.
10. The ld. DR has argued relying upon report filed by the ld. Assessing Officer, placed on records that there was a restructuring of jurisdiction in Delhi, whereby the erstwhile charge of PCIT-13 to whom ITO Ward-39(5) was reporting got merged with PCIT-12 and the cases of Ward-39(5) were relocated to ITO Ward-36(8). Reference was invited to CBDT Notification No.50/2014 dated 22.10.2014. It was further submitted that it was not case of transfer of jurisdiction. It was further argued that in either case no 127 orders are required for intra city transfers.
11. We have heard rival submissions in the light of material placed on records. It is a case of restructuring of jurisdiction and not a case of transfer u/s 127 of the Act. In any case, we find force in the argument of the Revenue that no 127 orders are required for intra city transfers. The grounds of appeal no.4 & 5 raised by the assessee is therefore dismissed.
12. Through ground of appeal no.6, the assessee has pleaded that no notice was served upon it and that it was given to the erstwhile partner. We have considered the issue; the appellant has not been able to place on records any evidence to adduce that the changes in partnership deed and the new communication details were provided to the lower authorities. Consequently, the ground of appeal no.6 has also been found to be bereft of any meritorious consideration. The same is therefore dismissed.
13. Through grounds of appeal 7 to 9, the appellant has contested the merits of the addition made u/s 69A r.w.s. 115BBE. The ld. Counsel for the assessee has argued that it could not comply with the notices of the ld. CIT(A) as the IT Portal had barred receipt of any communication from it. The ld. Counsel submitted that thus the appellant was prevented from making due compliance to the notices of Ld. First Appellate Authority. It was pleaded that its right to natural justice have thus been violated. It was also contended that it could not make due compliance to the statutory notices of the ld. Assessing Officer resulting in passing order u/s 144 of the Act.
14. The ld. DR placed reliance upon the order of the lower authorities.
15. We have heard rival submissions in the light of material placed on records. We have noted from the order of the ld. CIT(A) extracted hereinabove that he has dismissed the appeal of the assessee in a casual, summary and cryptic manner. We have noted from perusal of Form-35 filed before ld. First Appellate Authority that the ld. CIT(A) has not adequately considered the averments raised by the appellant assessee through its grounds of appeal. Thus, a case of improper adjudication has been clearly made out. Be that as it may be, in the interest of justice, we are of the considered view that the matter deserves remission back to the ld. CIT(A) for re-adjudication de novo. Accordingly, we set-aside the order of the ld. CIT(A) and direct him to readjudicate the appeal de novo in accordance with law, by giving due opportunity of being heard to the assessee and by passing a speaking order. The revenue authorities shall ensure that the assessee is granted adequate and timely excess to the Income Tax Portal so as to file its submissions, if any. The ld. CIT(A) is also directed to consider the decision of Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Ltd. in W.P.(MD)No. 2078 of 2020 and W.M.P.(MD)No. 1742 of 2020, dated 19.11.2024 on the issue of invocation of provisions of section 115BBE of the Act for the assessment year under consideration. Ground of appeal nos.7 to 9 are allowed for statistical purposes.
16. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 31st August, 2026.
