Narendra Kumar Gill Vs ITO (ITAT Delhi)
Moot issue to be decided is whether mentioning the PAN of another entity mistakenly instead of the PAN of the assessee makes the notice issued u/s 148 invalid or not when the notice is addressed to Shri Narendra Kumar Gill and the body of the notice clearly reflects that the notice has been issued to the assessee in his individual capacity.
At this juncture, we hold that there is no need to dwell upon the issue of notice u/s 142 or the contents thereof, as the notice u/s 142(1) do not confer any jurisdiction to the Assessing Officer. Hence, taking cognizance of the notice u/s 142(1) or the contents of the notice will only deviate the main issue of invoking the jurisdiction.
Section 292B meant to save only those notices in which there is in advertent error. Its saves those notices which in substance and effect issued according to the interest and purpose of the Act. In the present case, there is an in advertent error in the notice issued by the AO reflecting only the PAN column of the notice mentions PAN of the “HUF” instead of the ‘individual’ whereas the body of the notice and the address shows that the notice is clearly meant for the assessee himself. The provisions of Section 292B have been further clarified the Circular No. 179 of CBDT dated 30.09.1975 that this provision has been made to provide against purely technical objects without substance coming in the way of validity of the assessment proceedings. In the case of CIT Vs Masonellan India Ltd. 245 ITR 568 (Ker.), the Hon’ble Court held that Section 292B can be invoked if the action was in substance and in effect in conformity with the intent and purpose of the Act. The entire proposition arises from the established juris prudence that substance over form is the underlying philosophy of Section 292B. If in substance and in effect the notice is in conformity and with or according to the intent and purpose of the Income Tax Act, the mistake is to be ignored. Quoting a wrong PAN in the presence of numerous evidences to prove the intent and the purpose is a subject matter of Section 292B in the instant case. If the significance of word “substance” and “effect” is kept in mind then there is no justification to treat the notice as in valid. In the case of Shrish M. Dalvi 287 ITR 242 (Mum), the Hon’ble Court observed that as long as the defect or mistake has not caused prejudice to the assessee, the mistake was protected under the umbrella of Section 292B of the Act. The procedural provision has to be examined from the stand point of substantial complaints. Where such violation has occasioned prejudice to the assessee then only the assessee is protected from the rigors of wrong exercise of jurisdiction. As long as, no prejudice is occasioned to the assessee, as in this case the notice issued is protected by the provisions of Section 292B.
We are not certainly supporting or holding that a notice issued to Shri XXXXX “HUF” or Shri XXXXX “Karta” or Shri XXXXX “Karta HUF” is a valid notice when the assessment proceedings are meant for Shri XXXXX “individual”. In the instant case, the notice has been addressed to “Shri Narendra Kumar Gill” and also mentioned the word which makes it more clear and explicit to whom the notice is aimed at. It is the assessee whether individual, HUF, company, firm, AOP which owns the PAN. When the issue of primacy of the assessee over the PAN or primacy of the PAN over the assessee is to be considered, it is certainly the assessee (individual, HUF, company, firm, AOP) takes precedence.
Thus, on going through the provisions of the Act, judgments of the various Courts, the reasons recorded, the address on the notice, the body of the notice issue of notice, we hold that the notice of the Assessing Officer wherein there is a mistake only in the PAN number, the notice is covered by the provisions of Section 292B.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal has been filed by the assessee against the order of the ld. CIT(A), Muzaffarnagar, dated 25.01.2017.
2. Following grounds have been raised by the assessee:
“1. That the learned CIT(A) has grossly erred both in law and on facts in upholding the reassessment proceedings and confirming the additions so made by the Ld. Assessing Officer by disallowing the capital gains as claimed by the assessee. The addition made therein has been made with preconceived notions and such impugned order is without jurisdiction, liable to be quashed, as such.
2. That the impugned order so passed by the learned CIT(A) is bad in law as it is devoid of the acknowledgment of the fact that no valid notice u/s 148 of the Act was issued to the assessee prior to culmination of the reassessment proceedings and as such, the assessment so made is liable to be quashed.
2.1. That the learned CTT(A) has further erred both in law and on facts in upholding the validity of the notice u/s 148 of the Act when the said notice was issued to “Narendra Kumar Gill (HUF)'” having a different PAN, however, the assessment as frames was that of the “individual” bearing a different PAN as that mentioned on the notice u/s 148 of the Act.
2.2 The learned CIT(A) failed to quash the impugned order by overlooking that the learned Assessing Officer arbitrarily misused the powers given under the Act by further not providing the reasons recorded to the assessee bearing his PAN and thus, the learned Assessing Officer has grossly violated and misused the provisions of the statute and the assessment made thereto should be quashed, as such.
2.3 That the Learned CIT(A) has erred in law and on facts in invoking the provisions of Section 292B of the Act for rectifying the defects of the notice u/s 148 of the Act by wrongly interpreting the provisions and not considering the case laws assessee relied upon wherein the facts squarely covered assessee’s ease.
3. That without prejudice to the above, the learned CIT(A) has further erred both in law and on facts in not taking into cognizance the provisions of section 55(2)(b)(i) wherein the valuation by an approved valuer is to be taken as “fair Market Value” for acquisition of property.
3.1. That the provision of section 55A(a) authorize the assessing officer to refer for valuation only when the value as claimed is less than its “fair market value”. The provision prior to amendment on 01.07.2012 is relevant to assessment year 2009-10. Ld. Pr. CIT has erred in holding that amended provisions will apply on the assessments which are pending on the date of amendment and section 55A of the Act lays down the procedure and erred in holding that amended provisions are applicable on the assessment proceedings for year 2009-10 in spite of the amendment on 01.07.2012.
3.2. That the Learned CIT(A) has erred in law and on facts to held that reference is rightly made to DVO in provisions of section 55A without considering the words “is less than the fair market value” and erred in considering the reference under section 55A(b) which clearly states that it will apply in any other case i.e. a case not covered by section 55A(a) of the Act.
3.3. That the Learned CIT(A) has without considering the provisions of section 55A has erred in approving the valuation report of DVO, which was not placed on records upto assessment and without considering the basis of valuation taken by DVO, who has applied the stamp valuation not the fair market value as on 01.04.1981. So the reference and consequential report of DVO is beyond the preview of section 55A.
3.4. That further the learned CIT(A) failed to appre4ciate the ratio laid down in ITO v Padarti Venkata Rama Chandra Rao [2016] 74 Taxmann.Com 195 in differentiating Cost of Acquisition u/s 55(2)(b) of the Act from “Fair Market Value”.
4. That the Learned CIT(A) has erred on facts that stamp valuation as adopted for capital gain under section 50C is of “G.T. Road, Muzaffarnagar”, while the fair market value is taken of “Rampuri, Muzaffarnagar”, so the valuation is considered for the place which is not on “G.T. Road, Muzaffarnagar”.
4.1. That the Learned CIT(A) has further erred by not appreciating that the value as taken by the assessee is based on valuation of report of Govt. Approved Valuer.
4.2. That the reference to the Valuation Officer can only be made when the learned assessing officer is of the opinion that the value as declared by the assessee is below the fair market value of the property. The reference of property which is located at “G.T. Road, Muzaffarnagar and commercial property” mentioning as the property situated in “Rampuri Mohalla, Muzaffarnagar” is borne out of mere suspicion and surmises.
4.3. That the learned CIT(A) has grossly erred both in law and on facts in relying on the DVO report believing that the same was on record, however, the assessment as framed by the learned Assessing Officer lacked the reliance on the same, as the impugned order was passed on 31.03.2015 and the report, a fact also affirmed by the learned CIT(A) was passed on 08.01.2016. The reliance on the4 same believing it to be brought on record is not only wrong but makes the impugned assessment as framed as void-ab-initio.
5. That the capital gain as computed by learned assessing officer is wrong and Learned CIT(A) has erred in re-computing the capital gain on the basis of valuation report of DVO, which amount to re-assessment, which is barred by limitation.
RELIEF CLAIMED:
It is therefore, prayed that the order of learned CIT(A) be held to be un-tenable and further, assessment under section 147/143(3) of the Act is without jurisdiction and also, additions made along with interest levied may kindly be deleted and appeal of the appellant be allowed.”
Brief facts of the issue
3. The assessee was running a petrol pump in the name of “Modern Service Station” after constructing a building of 82 sq. mts. on the land measuring 689 sq. mts. (821 sq. yds.). The said land was sold vide sale deed dated 31.12.2008 reflecting the sale consideration of land of Rs.50 lacs out of which the share of the assessee was Rs.37,50,000/-. The AO determined that the stamp duty value of the property of Rs.1,93,93,650/-and made addition of Rs.1,40,33,973/- under the head “Long Term Capital Gain” after invoking the provisions of Section 50C r.w.s. 48 of the Income Tax Act, 1961.
4. Owing to the reason to believe, that the income of the assessee escaped assessment with regard to the capital gains arising out of the sale of immovable property namely “Modern Service Station” situated at Rampuri, Muzaffarnagar. The Assessing Officer, ITO Ward-1(2), Muzaffarnagar issued notice u/s 148 of the Income Tax Act, 1961 on 18.03.2014.
5. Further, notices u/s 143(2) and 142(1) were issued and duly served on the assessee. On the dates of hearing fixed on 11.12.2014, 17.12.2014, 29.12.2014, 12.01.2015, 15.01.2015, 02.02.2015, 19.02.2015 and 03.03.2015 nobody attended. The assessee has not filed any return incompliance to the notice. Hence, an opportunity was given to the assessee vide notice u/s 144 of the Act dated 13.03.2015. Then, in compliance to the notice issued, the assessee filed the ITR on 16.03.2015 declaring an income of Rs.5,53,890/-. The assessee filed replies to the queries of the Assessing Officer on 19.03.2015 and on 20.03.2015. Finally, the assessment proceedings have been concluded on 31.03.2015 resulting in passing on an assessment order with the income determined of Rs.1,41,79,759/- which includes long term capital gain of Rs.1,40,33,973/- against the return income of Rs.5,53,890/- which was inclusive of the capital gain of Rs.4,08,107/- as determined by the assesse.
Jurisdictional Issue – Notice u/s 148:
6. The ld. AR argued eloquently and also has filed written submissions summing of the arguments alongwith the case laws which have been duly perused in detail alongwith the paper book and record available before us. The crux of the arguments are as under:
1. The assessee is having PAN in two capacity one karta of HUF having PAN – AAAHN8408F and another in individual capacity having PAN – ACVPJ8013G.
2. The assessee received notice u/s 148 issued by ITO, Ward-1(2), Muzaffarnagar reflecting the PAN of the HUF of the assessee i.e. AAAHN8408F.
3. Thereafter, another notice dated 20.05.2014 was received by the assessee, issued by ITO Ward-1(2), Muzaffarnagar u/s 142(1) of the Act directing him to comply with the notice issued u/s 148.
4. Thereafter, another notice dated 05.01.2015 issued by ITO Ward-1(2), Muzaffarnagar u/s 142(1) was received by the assessee, directing him to furnish the details of income of family, purchase deed of property sold during FY 2008-09, details of movable and immovable properties held by the assessee or his family members as on 31.03.2009 and also the names of family members, their sources of income and copies of ITRs, if any. The assessee replied to the queries on 19.03.2015 and 20.03.2015.
5. The assessee submitted that the land belongs to the assessee in his individual capacity and the same was sold in the individual capacity.
6. The assessee was served with the notice issued by the Assessing Officer u/s 144 reflecting PAN – ACVPG8013G, this PAN pertained to the assessee individual.
7. In order to avoid best judgement assessment, the assessee filed the return in his individual capacity on 16.03.2015 along with detailed reply.
8. During the proceeding, the assessee was also informed that reassessment proceeding was initiated on the basis of sale of land on 31.12.2008.
9. That the impugned order so passed by the Ld. CIT(A) is bad-in-law as it is devoid of the acknowledgment of the fact that no valid notice u/s 148 of the act was issued to the assessee prior to culmination of the re-assessment proceedings and as such, the assessment so made is liable to be quashed.
10. The Ld. CIT(A) has further erred both in law and on facts in upholding the validity of notice u/s 148 of the Act when the said notice was issued to “Narendra Kumar Gill (HUF)” having a different PAN, however, the assessment as framed was that of the “individual” bearing a different PAN as that mentioned on the notice u/s 148 of the Act.
11. The Ld. CIT(A) failed to quash the impugned order by overlooking that the Ld. Assessing Officer arbitrarily misused the powers given under the Act by further not providing the reasons recorded to the assessee bearing his PAN and thus, the Ld. Assessing Officer has grossly violated and misused the provisions of the statute and the assessment made thereto should be quashed as such.
12. The Ld. CIT(A) has erred in law and on facts in invoking the provisions of section 292B of the Act for rectifying the defects of the notice u/s 148 of the Act by wrongly interpreting the provisions and not considering the case laws assessee relied upon wherein the facts squarely covered assessee’s case.
13. The assessment order-dated 31.03.2015 framed by the Assessing xxxxxxxxxxxxx individual capacity is bad-in-law as no notice u/s 148 had been issued by the Assessing Officer to the assessee in his individual capacity.
14. The notice u/s 147 was issued by the Assessing Officer to the assessee in his HUF capacity as it reflected the PAN of assessee HUF as AAAHN8408F.
15. The notice u/s 147 of the Act clearly reflected that the Assessing Officer was requiring the return containing details of the person in respect of which assessee was assessable or whose income was chargeable to tax in the hands of assessee.
16. The notice-dated 05.01.2015 also reflected that the assessee was directed to file the details of income of his family.
17. The issuance of valid notice u/s 147 is a jurisdictional aspect and any defect therein is not curable. It is not an irregularity but an illegality.
18. A valid notice u/s 147 confers jurisdiction on the Assessing Officer to assess / reassess the income of assessee or the income of person in respect of which assessee is assessable, which has escaped assessment. In the present case, assessment is framed in individual capacity but no notice u/s 148 had been issued to the assessee in individual capacity.
19. It is an undisputed fact that notice u/s 148 reflected PAN of HUF, it was admitted even by the Assessing Officer in his remand report stating that PAN of HUF was wrongly mentioned.
20. The Assessing Officer has also tried to save the notice by stating in the remand report that notice u/s 142(1) dated 05.01.2015 had reflected that the assessee was required to make compliance of para (b) only which was right tick marked. Assessing Officer had crossed para (a) & (c). Thus, the Assessing Officer had allegedly not required the details of income of family but required details of income of the individual.
21. The Assessing Officer has also stated that in the office copy of the notice-dated 05.01.2015, “Parivaar” word has not been right tick marked whereas in the notice served upon the assessee, the said word “Parivaar” has been right tick marked. It is to be submitted that a wrong inference had been drawn by the CIT(A) that the assessee had tempered with the said notice- dated 05.01.2015. Such an observation is highly objectionable.
22. Even otherwise, without prejudice to above, it is submitted that the notice u/s 148 has to be validly issued. If it is not so then the assessment framed in pursuance to such notice is a nullity. Even subsequent notices, issued u/s 142(1), though correct, do not confer jurisdiction on the Assessing Officer to assess / reassess the escaped income. It is a well established principle of law that even acquiescence does not confer jurisdiction on the Assessing Officer.
23. The Assessing Officer has taken support of section 292B & 292BB in the remand report; however the said sections are not applicable to the facts of the present case. Section 292B is quoted as under:
“292B – No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.”
24. Section 292B saves only those notices in which there is an inadvertent error or an apparent error. It saves those notices which in substance and effect issued according to the interest and purpose of the Act. In the present case, there is no inadvertent error in the notice issued by the Assessing Officer. It specifically reflects the PAN of HUF.
7. The ld. DR argued that having received information by the Assessing Officer that the assessee has sold immovable property namely Modern Service Station, the Assessing Officer has recorded the reasons to believe in the case of Shri Narendra Kumar Gill (Individual) for the instant assessment year and the same can be verified from the record. The Assessing Officer has issued notice validly and in the said notice it has been clearly mentioned that the status of the assessee as meaning thereby the notice has been issued to “Individual” in English. Further, the assessment was also completed in the name of the assessee in his individual capacity. Also the notice u/s 142(1) of the Act dated 05.01.2015 issued by the AO to the assessee is meant to assess the assessee in individual capacity. It has been argued that the notice was meant for assessing Shri Narendra Kumar Gill and it is a fact on record that only the PAN number was mistakenly quoted. It was argued that paras in the notice have been ticked off which proves that the notice was not issued to Shri Narendra Kumar Gill (HUF). It was also argued that in the notice issued u/s 148, the status of the assessee has been clearly mentioned as individual in the second para of the notice u/s 148. It was further argued that the assessee was fully aware that the notice has been issued to him in individual capacity and also filed the return of income on 16.03.2015 in his individual capacity. Having filed the return in his individual capacity which was assessed as individual, the contention of the assessee at this juncture, that the notice was issued to HUF was wrong on facts. It was argued that the ITR in the capacity of individual has been filed with PAN No. ACPBG8013G which has been duly assessed after going through the details filed by the assessee in his individual capacity in response to the notice issued. The office record also shows that no sign has been marked by the by the Assessing Officer which indicates (i.e. HUF). Rather, it clearly mentions means “Individual”.
8. Heard the arguments of both the parties and perused the material available on record.
9. From the above discussion, the moot issue to be decided is whether mentioning the PAN of another entity mistakenly instead of the PAN of the assessee makes the notice issued u/s 148 invalid or not when the notice is addressed to Shri Narendra Kumar Gill and the body of the notice clearly reflects that the notice has been issued to the assessee in his individual capacity.
9.1 At this juncture, we hold that there is no need to dwell upon the issue of notice u/s 142 or the contents thereof, as the notice u/s 142(1) do not confer any jurisdiction to the Assessing Officer. Hence, taking cognizance of the notice u/s 142(1) or the contents of the notice will only deviate the main issue of invoking the jurisdiction.
10. We have perused the reasons recorded as to whom the escapement of income was attributed and also the notice issued by the AO. The reasons recorded by the AO on 14.03.2014 clearly mentions the name of the assessee as Shri Narendra Kumar Gill. There was no mention of HUF in the reasons. For the sake of ready reference, the scanned version of reasons recorded by the AO for issue of notice u/s 148 is reproduced below:
Reason for issuing Notice u/s 148 of the Income Tax Act, 1961
Sh. Narendra Kumr Gill
861, Mangal Bhawan, South Bhopa Road,
Muzaffarnagar,
A.Y. 2009-10
Dated: 14.03.2014
As per information available with the undersigned, the assessee has sold an immovable property in the joint name of 3 persons situated at Moh. Rampuri, Muzafarnagar area 689.70 sq. mtr. During the financial years A.y. 2008-09 at a sale consideration at Rs.50,00,000/- whereas stamp duty has been paid on circle rate at Rs.1,93,93,650/- which is the difference of consideration Rs.1,93,93,650 – Rs.50,00,000/- ÷ 1/2 = Rs.71,96,825/- taxable under the provisions of 50-C of the Income Tax Act, 1961. As per sale deed the share of the assessee is 1/2 share of the total property.
Therefore, I have the reason to believe that the assessee has income chargeable to tax of Rs.71,96,825/-. Therefore, it is necessary so issue notice u/s 148 of the Income Tax Act, 1961.
Yours faithfully,
Sd/-
(A.K. Rajak),
Income Tax Officer,
Ward-1(2),
Muzaffarnagar
11. We have also perused the notice issued u/s 148. In the notice dated 18.03.2014, there has been a clear mention of the word which means “Individual”. For the sake of ready reference, the scanned version of notice u/s 148 is reproduced below: [Page no. 61 of the CIT(A)]
