Ballu Singh Vs ITO (ITAT Delhi)
ITAT Delhi held that assessment order based on notice issued under section 148 not by the jurisdictional AO is unsustainable and liable to be quashed.
Facts- The Assessing Officer (“AO”) was having information regarding cash deposited by the assessee in his bank account. The case of the assessee was re-opened for the assessment u/s 147 of the Income Tax Act, 1961 (“the Act”). Thereafter, the AO framed the assessment vide order dated 29.03.2016 and the income was assessed at Rs. 16,89,866/- u/s 147 r.w.s. 143(3) of the Act. Thus, he treated the cash deposited in bank account as unexplained income of the assessee, even without giving set off of cash withdrawal by him.
Aggrieved against the action of the AO, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, dismissed the appeal of the assessee and confirmed the addition made by the AO.
Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal.
Conclusion- From the decision of Ld.CIT(A), it is clear that notice u/s 148 was not issued by the jurisdictional AO. However, as per Ld.CIT(A), the assessment was framed by Jurisdictional AO i.e. ITO, Ward-65(5), New Delhi. “The Revenue has miserably failed to answer the question of jurisdiction as Ld.CIT(A in the impugned order himself states that the notice u/s 148 of the Act was not issued by the jurisdictional AO”. Therefore, it can be safely inferred that notice u/s 148 of the Act was issued by the Authority which has no jurisdiction for the assessee. The Revenue has not brought any order by the Competent Authority whereby the jurisdiction was conferred on the Authority who issued notice u/s 148 of the Act. In the absence of such order, I hold that assessment order passed by the AO was based on invalid notice hence, it also vitiated the assessment order in the light of binding precedents as cited by the assessee. The assessment order is hereby, quashed.
FULL TEXT OF THE ORDER OF ITAT DELHI
These two appeals filed by the assessee for the assessment years 2008-09 and 2009-10 are directed against the different orders of Ld. CIT(A), Delhi, both dated 06.12.20 19. Since identical grounds have been raised, both appeals were taken up together for hearing and are being disposed off by way of consolidated order for the sake of brevity.
ITA No.799/Del/2020 [Assessment Year : 2008–09]
2. First, I take up ITA No. 799/Del/2020 assessee’s appeal pertaining to Assessment Year : 2008-09. The assessee has raised following grounds of appeal:-
1. “On the facts and circumstances of the case, the learned CIT (A) has erred in confirming the reopening of the assessment proceedings uls 148 of the Act as a valid proceedings though the notice u/s 148 of the Act was issued by the Assessing Officer who did non hold jurisdiction (either territorial or class of person) over the appellant.
2. That the notice u/s 148 of the IT Act dated 30103/2015 is bad in law and without jurisdiction in as much as there was no cogent material or evidence on record to form reason to believe that any income of the assessee, for the concerned assessment year has escaped assessment. The information received (AIRICIB information) in itself was insufficient and could not be cogent material to assume a valid jurisdiction u/s 147/148 of IT Act. Learned CIT(A) turned down the submission of the assessee without looking in to the
3. That the learned Commissioner of Income tax (A) further erred in law in deciding the appeal on merits only without appreciating the fact that notice u/s 143(2) of the Act was neither issued nor served on the assessee whereas it is being a mandatory requirement before passing any order u/s 143(3)1147 of the Act, assessment order passed without issue of such notice deserves to be quashed as failure to issue notice u/s 143(2) render the reassessment void.
4. That the learned CIT(A) has erred both on facts and law by upholding the impugned addition u/s 69A of the Act, failing to appreciate that provisions of section 44AF of the Act is presumptive and assessee is not required to maintain books of account an records and further failed to appreciate that the Ld. AO had not summoned the employee of the assessee who were named during assessment proceeding.
5. That the learned CIT(A) has erred both on facts and law by upholding the impugned addition u/s 69A of the Act, failing to appreciate that verification letter under provisions of section 133(6) of the Act were sent after a long period of time and held assessee responsible for return of letter as well as non-response.
Without prejudice to above
6. That the learned CIT(A) has erred both on facts and law by upholding the addition of Rs. 15,31,500/- u/s 69A of the Act without appreciating the facts that Rs. 14,80,750/- has been withdrawn during the concerned period.
7. That in any case, the impugned assessment has been framed in violation of the principles of natural justice without granting to the assessee a fair, proper and reasonable opportunity to the instant case. “
3. Apart from these grounds, Ld. Counsel for the assessee raised two nadditional grounds which read as under:-
1. “That on the facts and circumstances of the case, the notice u/s 148 dated 29/03/2016 issued by Ld. AO, Ward 65(5), New Delhi is invalid and without jurisdiction as the said notice was issued by non-jurisdictional assessing officer. The Ld. AO, Ward 65(5), New Delhi did not have jurisdiction over the assessee as per provisions of the law and the related Notification No. 70/2014 dated 13/11/2014 (applicable from 15/11/2014) and thus, the assessment order framed u/s 144/147 of the Act pursuant to such invalid notice is bad in law and void-ab-initio and liable to be quashed.
2. That on the facts and circumstances of the case, the Ld.AO has erred in law while issuing notice u/s 143(2) of the Act, (on 08/11/2016, that is the day of filing of ITR in response to notice u/s 148 and notice u/s 143(2) handed over to AR of the assessee), which is issued in gross violation of the scheme of section 143(2) and thus the assessment order passed by the Ld. AO liable to be quashed in view of the decision of Hon’ble Jurisdictional High Court (Delhi) in the case of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249.”
4. Facts giving rise to the present appeal are that the Assessing Officer (“AO”) was having information regarding cash deposited by the assessee in his bank account. The case of the assessee was re-opened for the assessment u/s 147 of the Income Tax Act, 1961 (“the Act”). Thereafter, the AO framed the assessment vide order dated 29.03.2016 and the income was assessed at Rs. 16,89,866/- u/s 147 r.w.s. 143(3) of the Act. Thus, he treated the cash deposited in bank account as unexplained income of the assessee, even without giving set off of cash withdrawal by him.
5. Aggrieved against the action of the AO, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, dismissed the appeal of the assessee and confirmed the addition made by the AO.
6. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal.
7. Apropos to Ground Nos. 1 to 3 raised by the assessee, are against the validity of the re-opening and framing of the assessment u/s 147/143(3) of the
8. Counsel for the assessee reiterated the submissions as made in the written submission. The relevant contents of the written submission are reproduced as under:-
BRIEF FACTS OF THE CASE:
1. “Assessing Officer (AO), Ward 65(1), New Delhi received AIR/CIB data regarding cash deposit of Rs. 15,31,500/- in saving account of the assessee during the F.Y. 2007-08 i.e. AY 2008-09. Non statutory query letter issued but not served on the assessee and thus not responded. Hence, notice u/s 148 dated 30/03/2015 issued by AO which was not served upon the assessee as assessee is not living on the address mentioned in the notice(s).
2. Subsequently, notices u/s 142(1) was issued and again not served upon the assessee. Notice u/s 142(1) of the Income Tax Act, 1961 issued on 08/07/2015 at the correct address i.e. H.No. 415, Sector-22, Gurgaon, Haryana- 122001 were served on the assessee for the first time and when the notice was pursued through Authorised Representative (AR) as regards limitation on issue of notice beyond six years, letter from the AR has not been put on record by assessing officer and asked to file Return of Income for the AY 2008-09.
3. Assessee collected all the relevant documents from several places and filed his return of income on 07/12/2015 declaring income of Rs. 2,69,166/- which includes income from Salary, Business and income from other sources e.g. interest. After filing of Return of Income with Income Tax Officer, Ward 65(1), New Delhi, the Assessing Officer (Income Tax Officer) transferred the Return of Income along with other document such as notices issued till date, proceeding sheet etc. (assessment folder) to Income Tax Officer, Ward 65(5), New Delhi on the date not mentioned in transfer memo citing the reason for such transfer under remark column as “The assessee is retired employee of Delhi Police, therefore, the jurisdiction of the case lies with Ward 65(5)”.
4. Reasons recoded for opening of case was sought from AO Ward 65(5) and received on 04/01/2016 and objection was filed vide letter dated 10/02/2016 with regards to jurisdiction and reason to believe with respect to issue of notice u/s 148 of the Act, which was disposed of by the AO, Ward 65(5), New Delhi arbitrarily ignoring the decision of the Hon’ble Apex Court, High Courts and Jurisdictional ITAT and proceeded with assessment.
5. On the basis of documents furnished by the assessee such as Form 16, bank statements, interest certificate and copy of invoices, AO has chosen to issue notice u/s 133(6) of the Act in two cases and one of them returned back on 10/03/2016 while other was not replied but on 08/03/2016 (two days prior the letter issued u/s 133(6) got returned back) issued a final show cause notice u/s 142(1) fixing date for 11/03/2016 for FINAL HEARING proposing addition of cash deposit in bank as undisclosed income u/s 69 A of the Act.
6. The AO committed the error of law by adding the sum of Rs. 15,31,500/- without waiting for reply (and returned post), which has resulted in non-application of the judicial mind prejudicial to the interests of the Appellant. The act of aforesaid addition of Rs. 15,31,500/- is arbitrary ignoring jurisdiction, reasons, submission of assessee (letter) and other evidences which were available on record.
7. The matter was finally discussed on 11/03/2016 (on scheduled date) with AR of the assessee and assessment was completed except issue of assessment order. AO has not issued notice u/s 143(2) and the facts came in our knowledge when the file was inspected by counsel of the assessee and the matter is agitated before First Appellate Authority, who on the basis of remand report received from AO turned down the issue whereas no such notice has ever seen on the record.
8. The assessee vide his letter dated 04/01/2016 while requesting for reasons to believe cited the guidelines as pronounced by Hon’ble Delhi High Court in the case of CIT (Central)-1 Vs. Chetan Gupta decided on 15/09/2015 and stated that notice u/s 142(1) could not be issued unless and until a prior notice u/s 143(2) or 148 is issued. Service of notice upon assessee is a jurisdictional requirement and that must be mandatorily complied with. Notice u/s 143(2) has not been issued by the Ld. AO and this fact is confirmed by the counsel of the assessee who inspected the assessment file and later on re-confirmed by the Learned CIT(A)-XXI (who was looking the matter in appeal prior to disposal by Ld. CIT(A)-XXXV) in our presence, who turned each and every page of the assessment file, one by one, but did not find the copy of notice u/s 143(2).
GROUNDS:
This appeal contains as many as 7 (seven) grounds including legal grounds on the matter of jurisdiction (Ground-1), reasons to believe (ground- 2) and non- issue of notice u/s 143(2) of the Act (Ground- 3). A brief facts of all the legal grounds is mentioned hereunder for your perusal, and our detailed submission will follow on each and every grounds of appeal.
Ground -1 (Related to jurisdiction of AO)
1.1 Notice u/s 148 of the Act is issued by AO, ward 65(1), New Delhi. Upon filing of the Return of Income with AO, ward 65(1), New Delhi on 07/12/2015, case is transferred to AO, Ward 65(5), New Delhi with mention on transfer memo (paper book page no. 10) citing the reason under remark column as “The assessee is retired employee of Delhi Police, therefore, the jurisdiction of the case lies with Ward 65(5)”. When objected on the matter of jurisdiction during assessment, the Ld. AO replied that she has assumed jurisdiction on the basis of PAN jurisdiction. There is no such concept of PAN jurisdiction under the law and learned CIT (A) has erred in confirming the order passed by the Ld. AO.
1.2 Exactly the similar matter is already considered by this Hon’ble Appellate Tribunal in the case of Mukesh Kumar Vs. ITO (ITAT Delhi, “E” Bench), I.T.A. No. 2358/Del/2012, [Assessment Year : 2004-2005] Date of pronouncement: 12.06.2015, (Paper book page no. 83-86), where notice u/s 148 was issued by AO, Ward 26(4), New Delhi and the file was transferred to AO ward 26(3), New Delhi who was having valid jurisdiction and assessment order was passed by AO ward 26(3), New Delhi. The Hon’ble ITAT has quashed the assessment proceeding since there was no valid notice pursuant to which assessment was made. The issue of valid jurisdiction is a condition precedent to the validity of any assessment under Section 147 of the Act; therefore, the assessment made pursuant to such notice is bad in law.
1.3 The case of Mukesh Kumar Vs. ITO (supra) is squarely applicable in the present case and hence the assessment proceeding, as the notice u/s 148 issued by non-jurisdictional AO [Ward, 65(1), New Delhi], is liable to be quashed because the notice is invalid and assessment so made without issue of fresh notice u/s 148 from AO [Ward, 65(5), New Delhi] having jurisdiction, is non est in law.
Ground -2 (Related to Reason to Believe)
2.1 Notice u/s 148 dated 30/03/2015 is issued merely on the basis of AIR information. Except AIR information, Ld. AO had nothing in his possession to make a belief as to escapement of income. Even bank statement of the assessee was obtained by issuing letters u/s 133(6) dated 21/12/2015 to the concerned banks. Bank statement has been printed on 28/12/2015 by bank namely Oriental Bank of Commerce (OBC) (paper book page no. 56-60) & Axis Bank Limited (paper book page no. 61- 65)] and on 02/01/2016 by SBI (paper book page no. 51-55)] and later on furnished to the Ld. AO’. Obviously, there was no tangible materials in the possession of Ld. AO on the basis of which he makes a belief as to escapement of income. Reasons recorded by the Ld. AO (Paper book page no. 5-6) is reproduced hereunder:
“This office is in receipt of AIR information for the F. Y. 2007-08 in the case of Assessee. It is observed that the assessee has deposited cash amounting to Rs. 15,31,500/- in his saving bank account during the period.
Vide letter dated 26.02.2015 and 12.03.2015 respectively the assessee was asked to furnish necessary details/documents so that the source of cash deposit may be examined but the assessee neither attended nor furnished the details as asked for. Moreover, the assessee has not filed his ITR for the year under consideration.
In view of the above, I have reason to believe that the amount of cash deposit of Rs. 15,31,500/- have escaped assessment within the meaning of section 147 of the IT Act, 1961. Moreover, it is quite possible that any other income may also have escaped assessment and hence issue of notice u/s 148 becomes inevitable to bring the income that has escaped assessment under the ambit of assessment.”
2.2 Facts of the present case is similar to one decided by this Hon’ble Tribunal in Bir Bahadur Singh Sijwali Vs. Income Tax Officer Ward (1), Haldwani (ITAT Delhi) I.T.A. No.: 3814/Del/11 dated 20.01.2015 (paper book page no. 103-108) and later on followed in number of cases including Harmeet Singh Vs. Income Tax Officer, [order dated 10.02.2017, ITA No. 1939/Del/2016, (paper book page no. 109-121)] and Shri Mahavir Prasad Vs Income Tax Officer [ITA 924/DEL/2015, order dated 09/10/2017, (paper book page no. 122-131)], in all the cases, the Learned Tribunal has observed that there is no nexus or live link between the material which had come to the notice of the Assessing officer, and the formation of his belief that there was escapement of income by the assessee which may be assessable to tax. In all the above cases, opening of assessment u/s 148 has been questioned on the basis of invalid reason to believe and appeal has been allowed to assessee.
2.3 The Hon’ble jurisdictional Delhi High Court in case of Pr. CIT Vs. Meenakshi Overseas (395 ITR 677) (paper book page no. 132-141) has held that reasons recorded without independent application of mind, without tangible material, where link between the tangible material and formation of belief is missing, cannot be sustained.
2.4 In view of the facts and circumstances of the present case and the proposition of the law as settled in cases relied upon (mentioned above), we request your honour to quash the assessment so made on the basis of invalid notice u/s 148 of the Act.
Ground -3 (Related to Non-issue of Notice u/s 143(2))
3.1 Notice u/s 143(2) of the Act has neither been issued nor served in this case before completion of the assessment. This fact can be verified with the assessment order itself where there is no mention about issue of notice u/s 143(2). Further, order sheet maintained by the Ld. AO (paper book page no. 36-40) has confirmed the same. There is no mention about issue of notice u/s 143(2) on the order sheet of the Ld. AO whereas issue of notice u/s 142(1) is mentioned there on several times. Notice u/s 143(2) has not been issued by the Ld. AO at all and this fact is confirmed by the counsel of the assessee who inspected the assessment file (record) after completion of the assessment (request letter at paper book page no. 35) and when the matter was agitated before Learned CIT (A)- XXI (who heard the appeal in detail prior to disposal by Ld. CIT(A)-XXXV), the Learned CIT(A)-XXI, in our presence, turned every single page of the assessment file, one by one, but did not find the copy of notice u/s 143(2). However, learned CIT (A)- XXXV, who disposed of the first appeal, has grossly erred while passing appellate order has mentioned that the notice u/s 143(2) has been issued on 08/11/2016 (para 4.6.1 of order) after filing of return of income (in our opinion, without giving proper attention to assessment file). If the date mentioned by the Ld. CIT(A) is believed to be true, how can it be possible, whereas assessment order was passed by Ld. AO on 29/03/2016 i.e. much prior to the date of issue of notice u/s 143(2). A RTI application has been filed in this respect and copy of the notice issued u/s 143(2) is requested to be furnished but, reply is still awaited which can be produced once received from the authority.
3.2 The Hon’ble Supreme Court in the case of ACIT Vs. Hotel Blue Moon, [(321 ITR 362) (paper book page no. 159-165)], has held that the requirement to issue notice under Section 143(2) was mandatory. It was not “a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with.”
3.3 In the present case, the notice u/s 143(2) has not been issued by Ld. AO (emphasis supplied) as no such notice was seen by the counsel of the assessee who inspected the assessment file after completion of assessment and later on re-confirmed by the CIT(A)- XXI in our presence. Hence, following the decision of the Supreme Court in ACIT Vs. Hotel Blue Moon (supra) and the jurisdictional Hon’ble Delhi High Court in PR. Commissioner of Income Tax vs. Silver Line [(383 ITR 455), (paper book page no. 166-174) Alpine Electronics Asia Pvt. Ltd. Vs. DCIT (341 ITR 247), CIT vs. Shri Jai Shiv Shankar Pvt. Ltd [(383 ITR 448), (paper book page no. 179-187)], Indus Tower Limited vs. CIT, judgment dated 29/05/2017, the hon’ble courts on various occasions has concluded that for completion of the assessment under Section 148 of the Act, compliance with the procedure under Section 143 (2) is mandatory, and if notice is not issued to the Assessee before completion of the re-assessment, then such reassessment was not sustainable in law and liable to be quashed.
3.4 Therefore, keeping in view the facts mentioned above and decisions of the Supreme Court in ACIT Vs. Hotel Blue Moon (supra) and jurisdictional Hon’ble Delhi High Court in the cases mentioned above, we request your honour to quash the assessment as no notice u/s 143(2) was issued by the Ld.AO.
We have mentioned above, all the legal issues connected with this case in summary manner for your quick view. Please allow us to present the case in detail containing all the grounds of appeal. Our submission is as under:
Ground No. -1
“On the facts and circumstances of the case, the learned CIT (A) has erred in confirming the reopening of the assessment proceedings u/s 148 of the Act as a valid proceedings, though the notice u/s 148 of the Act was issued by the Assessing Officer who did not hold jurisdiction (either territorial or class of person) over the appellant.”
1.1 It is an established fact in this case that the impugned notice U/s 148 of the Income Tax Act, 1961 (paper book page no. 1) was issued by Ld. AO, Ward 65(1), New Delhi whereas Assessment Order u/s 143(3) of the Act was passed by Ld. AO, Ward 65(5), New Delhi i.e. Assessing Officer issuing the notice and passing the assessment order is not the same. Jurisdictional Assessing Officer in the instant case is Ld. AO, Ward 65(5), New Delhi who have passed Assessment Order u/s 143(3) whereas Notice u/s 148 was issued by non-jurisdictional Ld. AO, Ward 65(1) New Delhi. It is the Ld. AO, Ward 65(1) who makes a belief to reason for opening of assessment u/s 147 of the Act. Further, assessment order was passed without issue of fresh notice u/s 148 of the Act by the jurisdictional AO, Ward 65(5), New Delhi.
1.2 Section 148 mandates issue of notice before assessment, reassessment or computation of income u/s 147. As per section 148, it is mandatory that the Assessing Officer shall serve on the assessee a notice required him to furnish a return. The expression “Assessing Officer” used in the section 148 means ‘the Assessing Officer vested with the jurisdiction over the assessee as stipulated in the definition u/s 2(7A), by virtue of the directions / orders passed u/s 120, sub-section (1) & (2)’. Thus, the notice u/s 148 is required to be issued by the Assessing Officer who is vested with the jurisdiction over the assessee on the basis of the criteria of territorial area, a person or classes of persons, income or classes of incomes and cases or classes of cases as enumerated in sub-section 3 of section 120 of Income Tax Act.
1.3 As a matter of fact, PAN address of the assessee was of Delhi and the said notice issued by Assessing Officer, Ward 65(1), New Delhi. In this case, jurisdiction is vested with the Assessing Officer, Ward 65(5), New Delhi based on the class of person (Employed/retired with Delhi Police) and if territorial jurisdiction is ascertained as the assessee was also having business income (considering principal source of income and address available with the department as per PAN database), it fall under the jurisdiction of Income Tax Officer, Ward 33(3), New Delhi i.e. under Range- 33, New Delhi. Furthermore, as the assessee is residing in Gurgaon, Haryana at the time of issue of notice, Income Tax Officer at Gurgaon is vested with the jurisdiction over the assessee on the basis of territorial criteria. In any case, notice u/s 148 was not issued by jurisdictional Assessing Officer.
1.4 As per Notification No. 70/2014 dated 13/11/2014 (Paper book page no. 220-246) which is applicable from 15/11/2014, jurisdiction of the assessee was decided by that notification and relevant extract of the list/notification are reproduced to the extent applicable in the matter at hand:
