Case Law Details
Rahul Udayashankar Vs ITO (ITAT Bangalore)
ITAT Bangalore held that addition under section 69 of the Income Tax Act unjustified as source of fund duly explained. Rejection of the explanation relating to source of fund by the department without sufficient reason is unsustainable in law.
Facts- In the present case, the assessment order has been passed u/s 143(3) of the Act, wherein, it was made addition of 25,00,000/- towards deposit of Specified Bank Notes (SBN) during demonetization period to his Vijaya Bank Account. CIT(A) confirmed the said addition. Being aggrieved, the present appeal is filed.
Conclusion- The primary liability on the assessee is to prove the source of fund. The assessee received the above fund from his mother by way of gift and once the assessee explained the source, then onus shifts to Department, in which, the department authorities are entitled into probe further into the matter and enquiry the material available to them to come to an independent and unbiased finding to the genuineness of the sources of funds and they should not reject assessee’s explanation summarily or arbitrarily or without sufficient reason.
Held that the addition made by the ld. AO towards deposit into assessee’s bank account cannot be sustained. In view of this, we find that the source of deposit of amount of Rs.25,00,000/- to assessee’s bank account is properly explained and the said impugned addition is deleted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by the assessee is directed against the order of CIT(A) passed u/s 250 of the Income-tax Act dated 25/09/2023 for the assessment year 2017-18.
2. The assessee raised the following grounds:-
“1. The order of the CIT(A) – 12, Bengaluru passed under Section 250 of the Act dated 25/09/2023 in so far as it is against the Appellant, is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant’s case.
2. The CIT(A) failed to appreciate that the order of assessment passed by the learned assessing officer under Section 143[3] of the Act dated 31/12/2019 is bad in law as the mandatory conditions as envisaged in the Act to assume jurisdiction have not been complied with on the facts and circumstances of the case.
3. The CIT(A) erred in not annulling the assessment after observing that the notice u/s. 143[2] of the Act issued by the Income Tax Officer, Ward – 2[2][2], Bangalore was unsigned and not a valid notice on the facts and circumstances of the case.
4. The CIT(A) failed to appreciate that notice u/s. 143[2] of the Act dated 09.08.2018 of Income Tax Officer, Ward – 5[3][5], Bangalore bearing notice no. ITBA/AST/S/143(2)/2018-19/1010985539(1) is invalid, without jurisdiction and bad in law on the facts and circumstances of the case.
5. The CIT(A) failed to appreciate that there was no proper issue of mandatory notice u/s. 143[2] of the Act to assume jurisdiction in the case of the Appellant on the facts and circumstances of the case.
6. The CIT(A) failed to appreciate that the notice u/s. 143[2] of the Act was not issued by the learned assessing officer being Income Tax Officer, International Taxation, Ward 2[1], Bangalore who passed the assessment order and consequently the entire assessment proceedings and assessment order is without jurisdiction on the facts and circumstances of the case.
7. The CIT(A) failed to appreciate that the learned assessing officer erred in not communicating to the Appellant, the reasons/ issues for selection of the Appellant’s case for scrutiny on the facts and circumstances of the case.
8. The CIT(A) failed to appreciate that the assessment order passed u/s. 143[3] of the Act dated 31.12.2019 is barred by limitation since the assessment order was dispatched on 02.01.2020 and had not left the control of the learned assessing officer on or before 31.12.2019 on the facts and circumstances of the case.
9. The Appellant denies himself liable to be assessed on a total income of Rs. 26,74,560/- as determined by the learned assessing officer and confirmed by the CIT(A) as against the correct returned income of Rs. 1,74,560/- on the facts and circumstances of the case.
10. The CIT(A) erred in confirming the addition made by the learned assessing officer under Section 69A r.w.s. 115BBE of the Act amounting to Rs. 25,00,000!- on the facts and circumstances of the case.
11. The CIT(A) failed to appreciate that the provisions of Section 69A of the Act is not applicable in the case of the Appellant as the required conditions to invoke the provision of Section 69A of the Act were not existing and consequently no addition could have been made on the facts and circumstances of the case.
12. The CIT(A) erred in not accepting the explanation given by the Appellant regarding the amount received in the form of gift from the Appellant’s mother and erroneously confirmed the addition of 25,00,000!- made by the learned assessing officer under Section 69A of the Act on the facts and circumstances of the case.
13. The CIT(A) failed to appreciate that the Appellant has not only explained the source of the cash deposit into the bank account but further has also explained the source of the source, consequently, the addition requires to be deleted on the facts and circumstances of the case.
14. The CIT(A) failed to appreciate that the addition of Rs. 25,00,000!- could not be brought to tax under the provisions of Section 11 5BBE of the Act on the facts and circumstances of the case.
15. The CIT(A) failed to appreciate that tax rate at sixty percent is not applicable as against the thirty percent since the entire cash deposits has been made before assent of the president on 15th day of December, 2016 to the Taxation Laws (Second Amendment) Act, 2016 on the facts and circumstances of the case.
16. The CIT(A) erred in not appreciating that the gift of Rs. 25,00,000!- received by the Appellant from his mother, was prior to the appointed date as per the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016 i.e., prior to 31/12/2016 and the observation of the learned assessing officer that the gift was out of the bank notes which were no longer legal tender does not hold water on the facts and circumstances of the case.
17. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon ‘ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies himself liable to be charged to interest under Section 234B of the Income Tax Act on the facts and circumstances of the case. Further the levy of interest under Section 234B of the Act is also bad in law as the period, rate, quantum and method of calculation adopted on which interest is levied are all not discernible and are wrong on the facts of the case.
18. The Appellant craves leave of this Hon’ble Income Tax Appellate Tribunal to add, alter, delete or substitute any or all of the above grounds as may be necessary at the time of hearing of the appeal.
19. For the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of justice.”
3. Though the assessee has raised 19 grounds, for convenience we are adjudicating the appeal on the basis of issues emanated from these grounds.
4. Facts of the case are that the assessment order has been passed u/s 143(3) of the Act by the ITO, International Taxation, Ward-2(1), Bangalore, wherein, it was made addition of 25,00,000/- towards deposit of Specified Bank Notes (SBN) during demonetization period to his Vijaya Bank Account bearing No.117909011000022.
5. Against this, the assessee went in appeal before the CIT(A) by raising various legal grounds as well as on merit of the addition of 25,00,000/- u/s 69 of the Act. The ld.CIT(A) confirmed the order of the AO by dismissing all the grounds raised by the assessee, hence the assessee once again in appeal before us.
6. Ground No.1 is general in nature and does not require any adjudication, hence dismissed.
7. Ground No.2 is with regard to passing of assessment order u/s 143(3) of the Act dated 31.12.2019 is bad in law as the mandatory conditions envisaged in the Act to assume jurisdiction, which have not been complied with.
7.1 The ld.AR not made out a case to suggest that what are the mandatory conditions envisaged in the Act to assume jurisdiction, which have not been complied with. Being so, in absence, brought on record, the non complying of any condition by the AO, so as to assume jurisdiction to frame assessment u/s 143(3) of the Act. I am not in a position to upheld this ground No.2 of the assessee. Accordingly, this ground of the assessee is dismissed.
8. The 3rd ground for my consideration is with regard to notice issued u/s 143(2) of the Act, which is bad in law as there was no digital signature in it.
8.1 The ld.AR submitted that the Assessee before the CIT(A) submitted that the notice u/s. 143[2] of the Act dated 09/08/2018 vide Notice No. ITBA/AST/S/ 143 (2)/2018-19/ 10 10985539(1) issued by the Income Tax Officer, Ward 2[2][2], Bangalore being without physical or digital signature of the learned assessing officer is invalid, incomplete notice, non-est in law and assessment on the foundation of such notice does not hold water and the same is also non-est in law and liable to be annulled. The Assessee placed reliance on the decision of the Hon’ble Apex Court in the case of ACIT v. Hotel Blue Moon 321 ITR 362 (SC), CIT v. Laxman Das Khandelwal 417 ITR 325 (SC) among other rulings of various Hon’ble Courts.
8.2 The CIT(A) by placing reliance on the remand report issued by the learned assessing officer dated 25.0 1.2023 held the issue against the Assessee as under:
“….9.2.1……… However, the AO in the remand report has submitted a copy of the notice u/s. 143(2) of the Act dated 09.08.2018, which was duly signed by the ITO, Ward – 5[3][5], Bangalore. From the details available on the record, it is noted that the first notice u/s 143(2) issued by the ITO, Ward-2(2)(2), Bangalore being unsigned was not a valid notice. However, the notice u/s 143(2) that is signed by the (TO, Ward-5(3)(5) Bangalore is a valid notice and the assessment completed in pursuance of this notice is consequently valid…”
[Emphasis Supplied]
8.3 In this regard, the Assessee submits that the notice u/s. 143[2] of the Act dated 09/08/20 18 signed by Income Tax Officer, Ward – 5[3][5], Bangalore is an invalid notice and assessment completed in pursuance to such notice u/s. 143[2] is invalid in law. It is submitted that the said notice u/s. 143[2] of the Act issued by ITO, Ward 5(3)(5), Bangalore bearing the same Notice No. of the notice u/s. 143[2] issued by ITO, Ward -2[2][2], Bangalore i.e., ITBA/AST/S/143(2)/2018-19/ 1010985539(1) is manually signed by the ITO, Ward – 5[3][5], Bangalore and the ITO has merely stuck off the name and designation of ITO, Ward 2[2][2], Bangalore and the said notice is not available on the income tax portal of the Assessee and is in violation of the principles of natural justice.
8.4 The Assessee submits that initially two notices u/s. 142[1] of the Act of the same date i.e., dated 24/11/2017 were issued to him calling for his return of income to be filed for the impugned assessment year. One notice u/s. 142[1] of the Act was issued by Income Tax Officer, Ward 2[2][4], Bangalore which is an unsigned notice and another by Income Tax Officer, Ward 2[2][2], Bangalore. The Assessee in pursuant to the same, filed his return of income in response to notice u/s. 142[1] dated 24/11/20 17 with the then Jurisdictional Assessing officer, ITO Ward 2[2][2], Bangalore on 21/12/2017 and subsequently, the Assessee was issued with the unsigned notice u/s. 143[2] of the Act vide notice no. ITBA/AST/S/143(2)/201819/1010985539(1) dated 09.08.2018 by ITO, Ward 2[2][2], Bengaluru. The said notice u/s. 143[2] dated 09.08.20 18 issued by ITO, Ward 2[2][2], Bengaluru was also uploaded on the online income tax portal of the Assessee whereas the notice u/s. 143[2] of the Act signed by ITO, Ward – 5[3][5], Bangalore was not uploaded on the portal.
8.5 Further, the Assessee submits that as on the same date i.e., on 09/08/20 18, the case of the Assessee cannot be assessed and be pending with two different assessing officers at the same time. It is submitted that the return of income filed and the case being assessed with ITO, Ward 2[2][2], Bangalore, the notice issued u/s 143[2] of the Act by the ITO, Ward 5[3][5], Bangalore is without jurisdiction and unsustainable in law.
8.6 The learned assessing officer in his remand report has stated that the case of the Assessee was transferred in between from ITO Ward 2[2][2], Bangalore to ITO, Ward 5[3][5], Bangalore which was further transferred to ITO (Intl. Taxation), Ward 2(1), Bangalore on 29/08/20 19 as the Assessee was an NRI. The Assessee submits that while the case of the Assessee was pending with the ITO, Ward 2[2][2], Bangalore the notice u/s. 143[2] issued by ITO, Ward 5[3][5], Bangalore is without jurisdiction as the same is issued by a non-jurisdictional assessing officer of the Assessee and without prejudice to the above contentions, the learned CIT[A] failed to appreciate that transfer of Assessee’s case from one officer to another was not intimated to the Assessee as per the provisions of Section 127 of the Act.
8.7 Without Prejudice to the above, it is submitted that the notices issued u/s. 143[2] of the Act vide dated 09.08.20 18 issued by the ITO, Ward 2[2][2] and ITO Ward 5[3][5], Bangalore are without jurisdiction for the following two reasons:
i). The notice issued u/s. 143[2] of the Act by the ITO, Ward 2[2][2], Bangalore dated 09.08.2018 bearing Notice No. ITBA/AST/S/143(2)/2018-19/1010985539(1) is an unsigned notice and consequently without jurisdiction, and
ii). The notice issued u/s. 143[2] of the Act by the ITO, Ward 5[3][5], Bangalore dated 09.08.20 18 bearing the very same Notice No. ITBA/AST/S/ 143(2)/2018- 19/1010985539(1) is without jurisdiction as the case of the Assessee cannot be assessed and pending with two different assessing officers on the same day.
8.8 The ld. DR submitted that the assessee is participated in the assessment and there was no injury to the assessee to take up the issue before this Tribunal.
8.9 I heard both the parties and perused the material available on record. The contention of the ld.AR is that notice issued u/s 143(2) of the Act dated 9/08/2018 issued by the ITO, Ward-2(2)(2), Bangalore was unsigned and consequently assessment order framed on the basis of that notice is bad in law. In this case, notice u/s 143(2) of the Act for the assessment year 2017-18 dated 09/08/2016 was issued vide DIN No.ITBA/ASTS/143(2)/2018-19/10109855539(1). This notice has been issued online electronically that was digitally signed. On the basis of the above notice, the assessee appeared before the AO and presented his case, even if it is not considered but still has argued the case but that does not make an assessment order illegal. Being so, I do not find any infirmity in issuing a notice u/s 143(2) of the Act dated 09/08/20 18 and this ground of the appeal of the assessee is dismissed.
9. The next ground is with regard to notice u/s 143(2) of the Act, which was not issued by the AO who passed the assessment order u/s 143(3) of the Act.
9.1. The ld.AR submitted that the Assessee before the CIT(A) submitted that the notice u/s. 143[2] of the Act was not issued by the learned assessing officer who passed the assessment order and consequently the assessment order passed is invalid in law. The CIT(A) vide her order at Paragraph No. 9.2.2 held that the notice u/s. 143[2] had been validly issued by the ITO Ward 5[3][5] Bangalore and upon transfer of the assessee’s case, the proceedings were continued by the successor AO and the learned assessing officer vide notice u/s. 142[1] dated 30.09.2019, has passed the assessment order following the due procedure u/s. 129 and intimated the assessee about the change of incumbent of office. The learned CIT[A] further relied on Section 292BB of the Act stating that the Assessee had filed submissions and participated in the assessment proceedings and held the issue against the assessee.
9.2 In this regard, it is submitted that the notice u/s. 143[2] of the Act is to be issued by the assessing officer having jurisdiction on the Assessee and who had passed the assessment order, which has not been done in the Assessee’s case. It is submitted that the notice u/s. 143[2] was issued by ITO, Ward – 2[2][2], Bangalore and assessment order was passed by ITO, Intl. Taxation, Ward – 2[1], Bangalore.
9.3 The Assessee submits that the learned CIT[A] erred in holding that the Assessee has not raised any objection to the issue of notice u/s. 143[2] or the notice u/s. 142[1] r.w.s. 129 of the Act during the assessment proceedings nor during the appellate proceedings. The Assessee submits the he has made submissions to the improper issue of notice u/s. 143[2] and to the notice u/s. 142[1] r.w.s. 129 during the Appellate proceedings which has not been appreciated by the learned CIT[A]. The learned CIT[A] further erred in not appreciating the rulings relied by the Assessee in his rejoinder to the remand report dated 24.08.2023.
9.4 The learned CIT[A] further erred in placing reliance on Section 292BB of the Act. The Assessee submits that Section 292BB does not give the power to condone the failure or delay in issuing the statutory notice required to be issued u/s. 143[2] of the Act and Section 292BB deals with failure of service of notice and not with regard to failure to issue notice. The learned CIT[A] failed to appreciate that the assessing officer’s observation in the remand report that the AO has rightly continued the proceeding from the stage at which the proceeding was left by his predecessor after intimating the assessee u/s. 129 of the Act vide notice dated 30.09.20 19 is incorrect as the provisions of Section 129 of the Act are not applicable with respect to transfer of files from the ITO, Ward 2[2][2], Bengaluru to ITO, International Taxation, Ward 2[1], Bangalore and consequently, the learned CIT[A] failed to appreciate that Section 129 of the Act is not applicable to the factual matrix on hand. Further, ld. A.R. submitted that section 292BB of the Act does not give the power to condone the failure or delay in issuing the notice u/s 143(2) of the Act and he relied on the judgement of Hon’ble Supreme Court in the case of CIT Vs. Laxman Das Khandelwal (2019) 417 ITR 325 (SC) and also submitted that jurisdiction goes to the root of the cause and as such an issue can be raised at any stage of proceedings including appeal. For this purpose, he relied on judgement of Hon’ble Supreme Court in the case of Kanwar Singh Saini Vs. High Court of Delhi (2012) 4 SCC 307 and M/s. Mavany Brothers Vs. CIT (2015) SCC Online Bom 1686.
9.5 The ld. DR submitted that the provision of section 292BB of the Act takes care of such kind of technical irregularity for which, the assessee cannot raise the objections.
9.6 The contention of the ld. DR is that since the assessee has participated in the assessment proceedings, there is no prejudice caused to the assessee and that proviso of sec. 292BB will come to the rescue of the Revenue to cure defect of non service of notice us/ 143(2) of the Act by the AO over this jurisdiction for the assessment year 20 17-18 to frame assessment u/s 143 of the Act.
10. I heard both the parties and perused the materials available on record. The assessee challenges the issue of notice u/s 143(2) of the Act by non-jurisdictional AO i.e. ITO Ward-2(2)(2) Bangalore though he has no jurisdiction to issue a notice u/s 143(2) of the Act. According to assessee, assessee’s jurisdiction not lies with ITO Ward-2(2)(2) Bangalore. Later, one more notice u/s 143(2) was issued by ITO 5(3)(5) Bangalore on same date 9.8.20 18 by merely struck off the name and designation of ITO Ward-2(2)(2), Bangalore. Later the assessment has been completed by ITO International Taxation Ward 2(1), Bangalore without valid transfer of assessee’s case to the ITO International Taxation Ward 2(1), Bangalore, who has not properly assumed the jurisdiction. Now coming to the question whether assessee ought have raised the objection with regard to the jurisdiction before the AO, argument of the Ld. AR is that subsections (1) and (2) of the section 124 of the Act deals with the territorial jurisdiction and therefore sub-section (3) of the Act, applied only vis-a-vis objections regarding territorial jurisdiction. Section 124 of the Act is reproduced hereunder:
JURISDICTION OF ASSESSING OFFICERS
(1) Where by virtue of any direction or order issued under subsection (1) or sub-section (2) of section 120, the Assessing officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction–
(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and
(b) in respect of any other person residing within the area.
(2) Where a question arises under this section as to whether an Assessing officer has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief Commissioner or the Commissioner; or where the question is one relating to areas within the jurisdiction of different Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the official Gazette, specify.
(3) No person shall be entitled to call in question the jurisdiction of an Assessing officer—
(a) where he has made a return under sub-section (1) of section 115WD or under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 115 WE or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or subsection (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing officer, whichever is earlier.
(4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made.
(5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under subsection (1) or subsection (2) of section 120.
If the argument of Ld. AR is to be accepted, it would mean that sub-section (3) should be read as a proviso to sub-section (1). I am afraid I cannot accept this contention for the simple reason that sub-section (3) does not contain any such mandate.
10.1 Further, Hon’ble Karnataka High Court in the case of Adarsh Developers in WP No.1109/2023 dated 13.12.2023 held as under:
“43. It must be observed that Section 124[1] of the IT Act mentions the Assessing Officer’s territorial jurisdiction in respect of a person when such jurisdiction is vested by any direction or order issued under Section 120[1] or 120[2] of the IT Act, and Section 124[2] stipulates that when a question arises as to whether an Assessing Officer has jurisdiction to assess any person, such question shall be determined by the officers as mentioned therein with a further stipulation on the Officers who can decide such question when it relates to different jurisdiction. Section 124[3] prescribes the time limit. Where a return is filed under Section 115WD[1] or under Section 139(1], an Assessee cannot call in question the jurisdiction of the Assessing Officer after the expiry of one month from the date on which the assessee is served with notice under Section 143(2] or 143[1] or 115WE[2] and after the completion of assessment but on the condition that the earlier of the two will apply. The provisions of Section 124[1] relate to the territorial jurisdiction and determination of the questions relating to territorial jurisdiction when raised within the time limit under Section 124[3] by the officers mentioned in Section 124[2]. The provisions of Section 124 stipulate that when an assessee calls in question the jurisdiction of the Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under Section 124(2].
44. These provisions, it is argued, is limited to those cases where territorial jurisdiction is challenged, but even according to the decision relied upon by the petitioner, these provisions mainly refer to the territorial jurisdiction. It is implicit from this that the restriction under Section 124[3] of the IT Act on the right to raise the question of jurisdiction must extend to all grounds on which jurisdiction is called in question. If the right to call in question the jurisdiction is left open to be raised at any stage, the proceedings will remain inconclusive and that could not have been the intendment of the legislature. Therefore, this Court must opine that the petitioner must fail even on the second question.”
10.2 In view of the above discussion, I am of the opinion that assessee at this stage cannot raise the issue relating to issue of notice u/s 143(2) by non-jurisdictional AO being it is governed by Section 124(3) of the Act. This ground of appeal of the assessee is dismissed.
11. The next ground for my consideration is with regard to assessment order passed u/s 143(3) of the Act dated 3 1/12/2012 is barred by limitation.
11.1 The ld.AR submitted that the Assessee before the learned CIT[A] submitted that the assessment order passed u/s. 143[3] of the Act is barred by limitation. The learned CIT[A] vide paragraph no. 9.2.3. relied on the remand report issued by the learned assessing officer that the assessment order was passed on 31.12.2019 and also dispatched on that day. The CIT[A] held that the assessment order was passed on 31.12.2019 within the due date of limitation and noted that the order was digitally signed on 31.12.2019 at 5:59 p.m. thereby dismissing the ground raised in relation to the issue.
11.2 In this regard, it is submitted that the learned CIT[A] failed to appreciate that the order of assessment passed by the learned assessing officer under Section 143[3] of the Act dated 31/12 /2019 is bad in law as it is barred by time. It is submitted that though the order is dated 31/12 / 2019, it was served on the Assessee by registered post only on 02/01/2020. The said assessment order was dispatched by registered post on 02.01.2020. The Assessee had also enclosed copy of the postal cover and tracking of the postal cover containing the assessment order which was not appreciated by the learned CIT[A].
11.3 The Assessee submits that the learned CIT[A] failed to appreciate that order of any authority could not be said to be passed unless it was in some way pronounced or published. It was not enough if the order was made, digitally signed. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification. Thus, it is submitted that the order of assessment ought to have left the office of the learned Assessing officer on or before 31/12 / 2019, but in the instant case the order has left the office of the Assessing officer only after the specified date i.e., 31/12/2019, thus the order is passed in violation of section 153 of the Act and cannot stand the test of law.
11.4 The learned CIT [A] failed to appreciate that the learned assessing officer in the remand report has stated that the assessment order passed on 31.12.2019 was duly dispatched on 31.12.2019 but has not provided any material in support of the same and an adverse inference is to be drawn that the assessment order was not dispatched on 31.12.2019.
11.5 It is submitted that the learned CIT[A] erred in not following the binding Hon’ble Jurisdictional High Court decision in the case of M/s. Maharaja Shopping Complex Vs. DCIT in ITA No.832/2008 dated 14/10/2014 and in CIT v. BJN Hotels Ltd. reported in 382 ITR 110 [Karl and the binding Hon’ble Jurisdictional Tribunal decision in the case of Sri Kullachari Puttamma Nanjundi Vishwakarma v. DCIT in ITA No. 951 /Bang/2022 dated 06/02/2023, M/s. Globe Transport Corporation v. ACIT in ITA No. 629631/Bang/2014 dated 04/01/2019.
11.6 The Assessee also placed reliance on the Parity of the reasoning of the following decisions with regard to the above proposition:
a. The B.J.Shelat v. State of Gujrat AIR 1978 SC 1109
b. CIT Vs. Purshottamdas T Patel (1994) 209 ITR 52 (Guj).
c. Baba Ji Rice Mills Vs. State of Punjab (2012) 41 PHT 197 (PVT)
d. Joseph Jacob Vs. Agricultural Income-tax Officer 190 ITR 464 (Ker).
e. Commissioner of Agricultural Income-tax Vs. Kappumalai Estate 234 ITR 187 (Ker).
f. Shanthilal Godawat Et others Vs. ACIT, ITAT, Jodhpur Bench (2009) 30 DTR 413.
g. Kanubhai M. Patel (HUF) Vs. Hiren Bhatt or his successors to office 334 ITR 25 (Guj).
h. Government wood workshop v. State of Kerala (1998) 69 STC 62.
i. State of Punjab V. Khemi Ram AIR 1970 SC 214.
11.7 In view of the above submissions, the Assessee submits that the assessment order is barred by limitation and not in terms of provisions of Section 153 of the Act and consequently the assessment order passed u/s. 143[3] of the Act is bad in law and void-ab-initio and deserves to be cancelled and quashed on the facts and circumstances of the case.
11.8 The ld. DR submitted that this issue has been considered by the Hon’ble Supreme Court in the case of CIT Vs. Mohammed Meeran Shahul Hameed in Civil Appeal No.6204/2021 dated 07/10/2021, wherein it is held as under:-
“4.2 While deciding the aforesaid issues and question of law, Section 263 (2) of the Income Tax Act, which is relevant for our consideration is required to be referred to, which reads as under: “(2) No order shall be made under sub section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.” 4.3 On a fair reading of sub section (2) of Section 263 it can be seen that as mandated by sub section (2) of Section 263 no order under Section 263 of the Act shall be “made” after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. Therefore the word used is “made” and not the order “received” by the assessee. Even the word “dispatch” is not mentioned in Section 263 (2). Therefore, once it is established that the order under Section 263 was made/passed within the period of two years from the end of the financial year in which the order sought to be revised was passed, such an order cannot be said to be beyond the period of limitation prescribed under Section 263 (2) of the Act. Receipt of the order passed under Section 263 by the assessee has no relevance for the purpose of counting the period of limitation provided under Section 263 of the Income Tax Act. In the present case, the order was made/passed by the learned Commissioner on 26.03.2012 and according to the department it was dispatched on 28.03.2012. The relevant last date for the purpose of passing the order under Section 263 considering the fact that the assessment was for the financial year 2008 CI9 would be 31.03.2012 and the order might have been received as per the case of the assessee — respondent herein on 29.11.2012. However as observed hereinabove, the date on which the order under Section 263 has been received by the assessee is not relevant for the purpose of calculating/considering the period of limitation provided under Section 263 (2) of the Act. Therefore the High Court as such has misconstrued and has misinterpreted the provision of sub-section (2) of Section 263 of the Act. If the interpretation made by the High Court and the learned ITAT is accepted in that case it will be violating the provision of Section 263 (2) of the Act and to add something which is not there in the section. As observed hereinabove, the word used is “made” and not the “receipt of the order”. As per the cardinal principle of law the provision of the statue/act is to be read as it is and nothing is to be added or taken away from the provision of the statue. Therefore, the High Court has erred in holding that the order under Section 263 of the Act passed by the learned Commissioner was barred by period of limitation, as provided under sub Section (2) of Section 263 of the Act.
5. In view of the above and for the reasons stated above the question of law framed is answered in favour of the revenue — appellant and against the assessee — respondent herein and it is held that the order passed by the learned Commissioner under Section 263 of the Income Tax Act was within the period of limitation prescribed under sub Section (2) of Section 263 of the Act. The present appeal is allowed accordingly. No costs.
12. I heard both the parties and perused the material available on record. In this case, assessment order has been passed on 31/12/2019, as rightly pointed out by the ld. DR, this is the date within which the assessment order for assessment year 2017- 18 has to be made and there is no necessity of service of notice for the assessment order passed on or before 3 1/12/2019 and only requirement of law is to make assessment order on or before 12.2019 and not service of assessment order within this date. As rightly pointed out by the ld. DR, the issue is squarely covered against the assessee by the judgment of Hon’ble Supreme Court in the case of Mohammed Meeran Shahul Hammed cited supra. Accordingly, this ground of appeal is dismissed.
13. Next ground for my consideration is with regard to addition of Rs.25,00,000/- made u/s 69A r.w.s 115BBE of the Act.
13.1 The ld.AR submitted that the learned assessing officer during the course of assessment vide order u/s. 143[3] of the Act dated 31.12.2019 treated cash of Rs. 25,00,000/- deposited into the loan account of the Assessee during demonetization, as unexplained money, by invoking Section 69A r.w.s. 11 5BBE of the Act. Being aggrieved by the addition of Rs. 25,00,000/- u/s. 69A r.w.s. 11 5BBE of the Act, the matter was carried in appeal before the learned CIT[A] by the Assessee. The Assessee filed detailed submissions and paper book during the course of hearing before the CIT[A]. It was submitted that the impugned sum of Rs. 25,00,000/- was gift from his mother and also submitted that the Assessee has explained the source for the mother to give gift to the Assessee during the time of assessment, which was by way of withdrawal from the partner’s capital account of and by way of gift received from her husband. The Assessee also enclosed copies of the capital and current account of the mother’s business, audit report and financials of the partnership firm for the A,Y. 2017-18 during the course of assessment proceedings. The Assessee also submitted that provisions of Section 69A of the Act is not applicable and addition made under said section is bad in law.
13.2 The CIT[A] without appreciating the submissions of the assessee dismissed the ground raised in relation to the said issue and upheld the addition of Rs. 25,00,000/-made u/s. 69A r.w.s. 11 5BBE of the Act. The CIT[A] also upheld the action of the learned assessing officer in bringing to tax Rs. 25,00,000/- under Section 69A of the Act.
13.3 In this regard, it is submitted that the Assessee received gift from his mother amounting to Rs. 25,00,000/- on 13.11.2016. The said gift amount was deposited in the educational loan account by the Assessee’s mother. It is submitted that the educational loan account into which the cash was deposited was a joint account held by the Assessee and his mother. The details of source of the Assessee’s mother for gifting the sum of Rs. 25,00,000/- to the Assessee is as under:
13.4 The learned CIT[A] at Paragraph No. 9.3 of her order has stated that demonetized currency notes having become illegal tender, was therefore incapable of being gifted. The Assessee submits that as per the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, which came into effect from 31.12.2016 appointed date for this purpose means 31.12.2016. Further, as per Sec.5 of said Ordinance, from the appointed date, no person shall, knowingly or voluntarily, hold or transfer or receive any Specified Bank Notes. From the above what is clear is that up to the appointed date i.e. 31.12.2016, there is no prohibition for dealing with Specified Bank Notes. Reliance is placed on the decision of the Tribunal, Visakhapatnam Bench, in the case of Sri Tatiparti Satyanarayana in ITA No.76/Viz/202 1, where the Tribunal after considering relevant provision of Specified Bank Notes (Cessation of Liabilities) Act, 2017, held that there is no prohibition under the Act to deal with Specified Bank Notes up to 31.12.2016. The Assessee also relies on the decision of the Chennai Tribunal in the case of Mrs. Umamaheshwari v. ITO in ITA No. 527/Chny/2022 dated 14.10.2022. Hence, the objection of the lower authorities that gift was out of the bank notes which were no longer legal tender does not hold water.
13.5 The CIT[A] has further stated that third source of the gift is the claim of Rs. 5,00,000/- being gifted by the Assessee’s father to the Assessee’s mother who in turn has claimed to have gifted this amount to the Assessee and that no reasoning has been given as to why the Assessee’s father could not have gifted the money directly to the Assessee. In this regard, the Assessee submits that it is not for the revenue to determine how the gift should have been received by the Assessee as long as the sources for the gift have been explained satisfactorily.
13.6 The Assessee further submits that the learned CIT[A] failed to appreciate that one of the sources for gift by the Assessee’s mother being cash withdrawals from the partnership firm, whose income were already subjected to tax and the amount withdrawn have already suffered tax and taxing such withdrawals amounts to double taxation, which is not permissible in the law. The Assessee submits that the lower authorities failed to appreciate that the gift of the sum of money received from the mother is not in physical form to be given and received in hand to hand, but by way of credit to the bank account of the receiver which is permissible.
13.7 The Assessee has explained the sources of cash deposits into the bank account. The Assessee filed detailed submission during the course of the scrutiny assessment proceedings vide dated 21.10.2019. The Assessee further filed submissions dated 27.11.2019, 06.12.2019, 16.12.2019, 18.12.2019. The learned CIT[A] failed to appreciate that the Assessee is required to prove only the source and not required to prove the source of source. However, the Assessee in this case has proved the source of source also.
13.8 The learned CIT[A] failed to appreciate that Section 69A of the Act is not applicable to the facts of the Assessee’s case. For the sake of appreciation of the contentions the assessee wishes to reproduce the provisions of section 69A of the Income Tax Act.
“Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year”.
13.9 From the reading of the section it is clear that section 69A requires the following two conditions to be fulfilled:
a. The Assessee should be the owner of any money, bullion, jewellery or other valuable article which are not recorded in the books of account; AND
b. The Assessee offers no or satisfactory explanation about the nature and source of the investments
13.10 The Assessee submitted that he has satisfactorily discharged the burden of proof by explaining about the nature and source of cash deposits in his bank account and also by providing the details and explanation before the lower authorities. Hence the addition ought to have been deleted by the learned CIT[A]. Further, the learned CIT[A] erred in upholding the action of the learned assessing officer in taxing the addition made of Rs. 25,00,000/- under Section 11566E of the Act at 60%. It is submitted that provisions of section 11 5BBE of the Act is applicable only to such of those transactions which have happened on and after 15/12 / 2016 and the said special rate of taxes cannot be made applicable to the transactions prior to 15/12/2016. The taxation Laws [Second Amendment] Act, 2016, the provisions of section 115BBE of the Act was introduced and the assent of the President of India was received only on 15/12/2016.
13.11 Wherefore, considering the above submissions it is prayed that the addition of Rs. 25,00,000/- made by the Ld. AO and upheld by the learned CIT[A] is purely on suspicion, surmises and assumptions and without any proper reasoning. Consequently, the addition amounting to Rs. 25,00,000/- deserves to be deleted for the advancement of substantial cause of justice.
13.12. The ld. DR submitted that there is no proper sources for depositing the said amount of Rs.25,00,000/- to the assessee’s bank account during the demonetization period. The assessee is building a concocted story before the authorities to escape from the payment of tax. According to the ld. DR, it only made belief story, for which, no importance to be given, as there was no valid source of income to assessee’s mother also.
14. I heard both the parties and perused the material available on record. The contention of the ld.AR is that the assessee deposited Rs.25,00,000/- to assessee bank loan account, for which the source is gift from his mother. The source of such fund of his mother is as follows:-
14.1 In my opinion, in the present case, the assessee explained the source of bank deposit. The lower authorities have not satisfied about the explanation offered by the assessee. The primary liability on the assessee is to prove the source of fund. The assessee received the above fund from his mother by way of gift and once the assessee explained the source, then onus shifts to Department, in which, the department authorities are entitled into probe further into the matter and enquiry the material available to them to come to an independent and unbiased finding to the genuineness of the sources of funds and they should not reject assessee’s explanation summarily or arbitrarily or without sufficient reason. The duty of the AO is to examine all materials carefully and objectively. But when the AO on appreciating all the material evidence on record, come to the conclusion that assessee’s explanation regarding cash deposit could not be accepted then Tribunal cannot interfere. However, in the present case though assessee placed all necessary evidences for receipt of gift from assessee’s mother, it is observed by AO that it makes no sense when the assessee is not in India, during that period of demonetization, he received the gift from his mother and also observed that during that demonetization period, the person who is holding such currency ought to have deposited in her bank account and being SBN notes, his mother ought not have been gifted to the assessee. In my opinion, the reason advanced by the AO to reject the gift made by the assessee’s mother to assessee is not valid reason. Without verifying whether the assessee’s mother having the source to gift the said amount to the assessee, he rejected the claim of the assessee. In my opinion, it was the responsibility of the ld. AO to carry out verification and examination and culled out material contrary to the position canvassed by the assessee. There is no clinching material or evidence against the assessee brought on record by AO. The confirmation of gift made by assessee’s mother could not be rejected without bringing any material against the assessee. The ld. AO cannot wash away the identity and existence of assessee’s biological mother and confirmation gift made by her to her biological son. Therefore, under such circumstances, no adverse inference could be drawn in respect of impugned transactions between the mother and son by observing that the assessee was not in India during demonetization period. It is noted that when the assessee and his mother having joint account and the assessee’s mother deposited any money to their joint account, it cannot be disbelieved on the reason that the present assessee was not in India during demonetization period and his stay during in India during this assessment year is minimum. In my opinion, after considering entire material on record and circumstances of the case, I have to hold that the addition made by the ld. AO towards deposit into assessee’s bank account cannot be sustained. In view of this, we find that the source of deposit of amount of Rs.25,00,000/- to assessee’s bank account is properly explained and the said impugned addition is deleted.
14.2 This ground of appeal of the assessee is allowed.
15. The assessee raised the ground in the appeal with regard to levy of interest u/s 234B of the Act, which is consequential and mandatory in nature to be charged accordingly.
16. In the result the appeal of the assessee is partly allowed.
Order pronounced in the open court on 10th January, 2024.
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