Simar Kaur Vs ACIT (ITAT Chandigarh)
It is seen that the assessee has consistently maintained its challenge that notice was not issued as it has not been served. The tax authorities have rejected the challenge holding that non-receipt is not equivalent to non-service.
It is seen that though the challenge is recorded the wording in its rejection has been remained ambivalent as no specific finding is found to have been given holding that the notice was issued on a specific date. Nor is there any reference addressing the mode and manner of its issuance nor the fact that it was issued at the correct address. In order to hold that the notice was issued, these above facts need to be recorded and available on record so as to enable an adjudicating authority to conclusively uphold the finding as otherwise sans facts the conclusion is open to the challenge of being arbitrary dehors facts and hence non-maintainable.
Thus, though the dismissal of the ground in the manner worded in the face of the challenge does not inspire much confidence in its correctness, however, even otherwise, I find that the assessee has a good case on the legal challenge posed as well as on merits. No doubt mention of the full investment value finds a mention in the “reason to believe”, the fact remains that addition has been made proportionate to the assessee’s share. This fact by itself may not lead generally to the conclusion that the re-opening was mechanical.
However, in the facts of the present case, when the Sale Deed is taken into consideration, it is clearly evident that it spells out the fact that only part consideration was moving from the assessee and thus if this bare document itself had been seen before the formation of the belief by the A.O. then while recording the reasons the AO would not have recorded the entire consideration as assessee’s contribution and would have noticed that there were other contributors also. The fact that this document was properly seen at the assessment stage as ultimately instead of Rs. 63.51 lakhs was limited to Rs. 28,03,753/- i.e. the assessee’s share. No doubt the assessee was not a regular tax payer and thus, no return could be consulted by the Assessing Officer while exercising the powers of re-opening. However, the fact remains that it was incumbent on him to at least check the facts recorded in the Sale Deed carefully ascertaining the extent of the assessee’s contribution. Since the facts set out in the Sale Deed cognizance of which was taken by the Assessing Officer himself while making the addition were un-disputably clear as is evident from Paper Book pages 10, 11, 11A and 12 the conclusion that admittedly its proper consideration escaped the notice of not only the A.O. but the approving authority also is clearly evident from record. Thus not finding fault in the manner of the specific words recorded in the order to grant approval, which has been the crux of ld AR’s argument the objection is sustained on the fact that no care or attention evidently was taken to consider the bare preliminary facts itself and the power was exercised mechanically without examining the record.
An authority vested with the onerous powers of re-opening u/s 147 and granting of approval is expected to exercise its power consciously, carefully and with full awareness. The public at large cannot be put to the mercies of careless, casual, arbitrary or whimsical exercise of power. The order deserves to be quashed on this count itself. Ordered accordingly.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The present appeal has been filed by the assessee against the order dated 16.01.2019 of CIT(A) Karnal pertaining to 201011 assessment year on the following grounds:
1. That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer with regard to reopening of the case u/s 148 and also on merits.
2. That the Ld. CIT(A) has erred in holding the proceedings u/s 148 as valid even though there were no reasons to believe that the income of the assessee as escaped assessment under such section to the tune of Rs. 63.51 lacs.
3. That the Ld. CIT(A) has erred in holding the proceedings u/s 148 as valid even though the approval for initiating proceedings under section 147 given by the PCIT/JCIT-Karnal has been given in mechanical manner without application of mind.
4. That the Id. CIT(A) has erred in holding that the notice u/s 148 was legally valid and has failed to consider the fact that the notice u/s 148 was never served upon the assessee and was returned back to the Department unserved on 10th of April 2017 and, as such, the proceedings are void-ab-initio
5. That the notice u/s 148 of the Act has not been served as per section 282 of the Income Tax Act read with CPC procedure.
6. Notwithstanding the above said ground of appeal, the Ld. CIT (A) has erred in confirming the addition of Rs. 28,60,000/- as unexplained investment by not considering our submissions properly.
7. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off
2. Inviting attention to grounds 1 to 5 raised herein above, it was his submission that by way of these grounds, the assessee has challenged the jurisdiction and vide ground No. 6 the challenge is posed on the merits of the addition made.
3. Addressing the respective orders of the tax authorities, the ld. AR challenged the order on the ground that the order for want of jurisdiction deserves to be quashed as notice to the assessee was never issued by the Assessing Officer. This challenge, it was submitted remains un-assailed on record. Jurisdiction was also challenged on the grounds of being arbitrary as it was exercised mechanically. It was submitted this fact was evident from the record itself as no effort, as a matter of record was made to see the actual proportionate share of the assessee’s contribution and the reasons recorded would show that entire hundred percent investment in the property was wrongly considered to have been made by the assessee. This mistake and incorrect fact recorded in the reasons recorded, it was submitted, had been corrected by the Assessing Officer himself at the assessment stage as ultimately addition was made to the proportion relatable to the assessee’s share. The said addition is also challenged on merits. However, reverting to the jurisdictional challenge, it was argued that the approval was mechanically given by the approving authority. On the basis of these arguments relying on judicial precedent available it was his prayer that the order of A.O. may be quashed.
3.1 Notwithstanding the above arguments, it was his submission that the impugned order deserves to be set aside on merits also. Referring to the record it was submitted, that the assessee’s submissions and evidences remained ignored. The order was assailed stating that no effort even to discuss them was made by the Appellate Authority. Attention was invited to the fact that an explanation all along was offered without prejudice to the primary objection and this was evident from the discussion thereof in the assessment order, itself though the discussion was incomplete. For the said purposes attention was invited to the documents on record. It was submitted that apart from the synopsis which has summed up the legal argument and the case law being relied upon, reliance was placed on Paper Book No. 1. The Paper Book contains the documents running from page 1 upto page 49; and Paper Book No. 2 running from 50 to 63 and case laws Paper Book running upto 154 pages in total. It was submitted, that the documents contained in Paper Book-1 are certified copies of record obtained from the office of the AO.
4. Relying on the synopsis and reading through the background of the case and the issues involved, facts and records available were highlighted. For ready reference, para 1 to 4 of the synopsis being relied upon is extracted hereunder:
1. The case of the Assessee was reopened by issue of notice u/ sec 148 of the Act.
2. Such case was reopened based on information about a property purchased by the appellant to the tune of Rs. 63.51 lacs and the Assessing Officer (‘AO’) framed the Assessment assessing the income at Rs. 28.04 lacs for the share of the appellant in such property.
The assessment was framed ignoring the facts that: The notice for attaining jurisdiction i.e. notice u/ sec 148 was never served on the assessee and
3. The submissions explaining the sources of such purchase of property which were duly brought on record by the assessee for Rs. 27.81 lacs being 42.78% of Rs. 65.41 of whole property transaction value (i.e. Rs. 63.51 lacs Transaction value & Rs. 1.9 lacs Stamp Duty)). [Reasons at Page-1 Paperbook (‘PB’)].
4. The assessee filed an appeal before the CIT(A), Karnal, and duly explained that the proceedings itself were void in case of the appellant;
in the absence of valid service of notice u/ s 148 &
in the absence of valid reasons to believe for reopening the case u/s 148 &
in the absence of valid satisfaction of the Pr. CIT, Karnal for reopening the case u/s 148
besides the fact that the sources of purchase of property were duly submitted to the AO,
which were ignored by the Worthy CIT(A) and the case was decided against the facts and circumstances of the case.
5. The legal challenge addressed vide ground No. 1 to 5 as set out in page 2 of the synopsis was referred to so as to set out the following facts :
A. Issue of Notice u/s 148 of the Act for re-assessment proceedings u/sec 147 of the Act being Void Ab initio, being based on notice which was never served on the assessee and
B. Notice u/s 148 issued without any valid ‘reasons to believe’, which is clearly evident from the fact that the income alleged as escaped in the reasons being Rs. 63.51 lacs of purchase consideration was itself revised to Rs.28.04 lacs at the time of assessment finalization.
C. Issue of reopening of the assessment based on mechanical satisfaction of the Pr. CIT, Karnal without application of mind
6. The reasoning of the AO and of the First Appellate Authority upholding the AO was assailed on the following grounds:
At the outset, it is submitted the notice u/s 148 was never served on the assessee and therefore the jurisdiction for reassessment assumed on the basis of such notice issued u/s 148 of the Act is bad in law and must be restored to nullity.
Moreover, during the assessment proceedings, when the assessee received a notice u/s 142(1) of the Act, he:
i. attended the assessment proceedings though his authorized representative;
ii. brought out the issue of non-service of notice us 148 of the act to the AO;
iii. filed a return u.s 148 under protest, without waiving off his rights to challenge the jurisdictional wrongly assumed by the assessee in his case.
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