Swami Keshwanand Sikshan Sansthan Vs ITO (ITAT Jaipur)
Facts- Assessee deposited INR 92,41,500 with a banking company but didn’t filed any ROI for AY 2012-13. Therefore, the source of cash deposited remained unexplained and the case was reopened u/s 147. After making detailed inquiry, AO completed the assessment u/s 143(3) r.w.s 147 assessing total income as INR 2,87,97,100.
Assessee argued that AO initiated action u/s 147 and issued notice u/s 148 on 25.03.2019. Assessee several times requested the AO to supply reasons for issuance of notice u/s 148 but AO didn’t provided the recorded reasons.
Conclusion- The Hon’ble Allahabad HC in Raj Kishore Prasad Vs ITO (1990) 195 ITR 438 (All) has held that “basis for issuance of a notice u/s 148 is the satisfaction recorded by CIT and in case order of CIT contains no finding or direction and there is only written a word “Yes” then their Lordships have held that the sanction was accorded in a mechanical manner without applying judicious mind to the fact of the case and thus the same cannot be considered to be a proper and valid sanction.
Since in the present case, the sanction was accorded by the ld. CIT in a purely mechanical manner without application of judicious mind, therefore, the sanction so accorded cannot be held to be a proper and valid sanction within the meaning of Section 151 of the Act and for this reason also, the impugned notice U/s 148 of the Act falls to the ground and proceedings for reopening of the assessee in absence of valid sanction of CIT cannot be initiated.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
Both these appeals have been filed by the assessee against the separate orders of the ld. CIT(A)-3, Jaipur dated 17/09/2020 and 10/09/2020 for the A.Y. 2012-13 & 2013-14 respectively.
2. The hearing of the appeals was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
3. Since, common issues have been involved in both these appeals, therefore, we take appeal i.e. ITA No. 309/JP/2020 for the A.Y. 2012-13 as a lead case for adjudication. In this appeal, the assessee has raised following grounds of appeal:
“1. That the Ld. Commissioner of Income Tax (Appeals)-III, Jaipur is erred in :-
(i) sustaining the proceedings of section 147/148 as such the reasons for issue of notice u/s 148 were not supplied to the assessee.
(ii) Sustaining the proceedings of section 147/148 as the Notice issued u/s 148 is without the mandatory sanction / approval of the Commissioner of the Income Tax, therefore it is without jurisdiction and proper authority of law as such is ab-initio void and the assessment completed on the basis of this notice is also ab-initio void.
(iii) Sustaining the addition so made are purely illegal and against the law as the assessing officer himself rejected the books of account and for making additions relying on the same set of books of accounts.
(iv) Sustaining the additions of Rs. 6,17,900/- on account of anonymous donation as the assessee explained the same during the course of assessment.
(v) Sustaining the addition of Rs. 4,24,205/- on account of difference in cost of construction because the copy of valuation report was not provided to verify the alleged difference and addition made without confronting the valuation report to the assessee.
(vi) Sustaining the addition of Rs. 445000/- on account of payment given for purchase of land.
(vii) Sustaining the addition of Rs. 16,53,383/- on account of bogus creditors.
(viii) Sustaining the Addition of Rs. 26,87,000/- on account of difference in advertisement expenses.
(ix) Sustaining the act of Ld. Assessing Officer about the disallowance of exemption u/s 10(23C)(iiiad) as the assessee is eligible for the exemption.” .
2. That the assessee reserves the rights to add, amend/alter any of the grounds of appeal during the course of hearing of the appeal.”
4. The brief facts of the case are that the assessee is a Registered Society engaged in educational activities at Village Bhadhadhar, Distt. Sikar. The assessee had not filed its original return of income for the A.Y. 2012-13. Assessment was reopened u/s 147 of the Income Tax Act, 1961 (in short, the Act). As per information, assessee deposited Rs. 92,41,500/- with a banking company during the F.Y. 2011-12 relevant to A.Y. 2012-13, but no return of income had been filed by the assessee for A.Y. 2012-13. Therefore, the source of cash deposit Rs. 92,41,500/-remained unexplained and case was reopened under section 147 of the Act. Accordingly notice u/s 148 of the Act was issued on 25.03.2019 to the assessee after obtaining prior approval of the Pr. CIT-(E), Jaipur. In compliance to notice u/s 148 of the Act, the assessee filed its ITR for A.Y. 2012-13 on 12.06.2019 declaring income of Rs.1,28,680/-. Notice u/s 143(2) of the Act was issued to assessee on 18.07.2019 as well as notice u/s 142(1) alongwith detailed query was also issued on 18.07.2019 to the assessee. After making details enquiries, the A.O. completed the assessment U/s 143(3) r.w.s. 147 of the Act vide order dated 21/12/2019 by assessing total income of the assessee at Rs. 2,87,97,100/-.
5. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the entire facts and circumstances as well as submissions of both the parties given part relief to the assessee. Against the impugned order passed by the ld. CIT(A), the assessee has preferred the present appeal before the ITAT on the grounds mentioned above.
6. Grounds No. 1 (i) and (ii) of the appeal raised by the assessee relates to challenging the order of the ld. CIT(A) in sustaining the proceedings U/s 147/148 of the Act. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied upon the written submissions filed before the Bench and the said is reproduced below:
The Ld. A.O. initiated the action u/s 147 and issued notice u/s 148 on 25.03.2019. The assessee specifically requested the A.O. to supply the reasons for issue of notice u/s 148 vide letter dated 24.05.2019 which is available in the file of A.O., the copy of the same is attached herewith for ready reference of the Hon’ble Bench. It is once again requested vide letter 17.10.2019 which was served on the office of the A.O. on 18.10.2019, the copy of the letter dated 17.10.2019 and the proof of service are also attached herewith for ready reference of the Hon’ble Bench.
From the perusal of the same the Hon’ble Bench will observe that the assessee made specific request and sought the reasons for reassessment, but the A.O. not supplied the reasons recorded for issue of notice u/s 148.
In this connection it is worthwhile to submit that it is law of land that the reasons recorded for issue of notice u/s 148 are required to be supplied suo-moto to the assessee or he demands and if the same are not supplied then entire reassessment proceedings are bad in eye of law even after completion of assessment. On this issue I would like to rely on the Judgment of Hon’ble Supreme Court delivered in case of GKN Driveshafts (India) Ltd. v/s Income Tax Officer reported in 125 Taxman 963 (SC). In this judgment the Hon’ble Court is of the view that the A.O. is bound to furnish the reasons recorded for issue of notice u/s 148, within reasonable time.
Therefore, the A.O. is under legal obligation to supply the copy of reasons recorded for issue of notice u/s 148 to the assessee. The issue about when the reasons have to be provided has been settled by the Judgment of Hon’ble Delhi High Court as well as the Judgment of Hon’ble Supreme Court.
The Ld. A.O. in his remand report admitted that the assessee has demanded the reasons for issue of notice u/s 148 vide letter dated 24.05.2019. It is further submitted by the Ld. A.O. that the assessee mentioned only one line in the letter dated 24.05.2019, therefore skipped from supply. The Ld. A.O. also submitted in his remand report that the letter dated 17.10.2019 is not served on to the Ld. A.O. The relevant portion of the remand report is reproduced by the Ld. CIT(A) in his order at Page 6.
In respect of demand of reasons letter dated 24.05.2019, Ld. CIT(A) is of the opinion that mere mentioning a line is not a sufficient demand and about the letter dated 17.10.2019 he completely relied on the submission of the Ld. A.O.
In this respect it is worthwhile to submit that the Ld. CIT (A) is erred in deciding this ground of the appeal of the assessee. As far as the sufficiency of demand of reasons is concerned, it submits that we could not lay our hand on any kind of specific format for demand of reasons for issue of notice u/s 148. There must be demand of reasons and the proof of the same has to be on record, this is there but not appreciated by the Ld. CIT(A) in judicious manner.
By the version of the Ld. A.O. it is very much clear that how casually the Ld. A.O. has taken the issues and Ld. CIT(A) also approved his act.
As regards the second demand letter dated 17.10.2019 is concerned the assessee again requested for supply of reasons vide another letter dated 17.10.2019 sent through courier. This letter has been served on the office of the Ld. A.O. and proof of service provided by the courier agency is also submitted to the Ld. CIT(A) but not considered / appreciated in judicious manner.
The Ld. A.O. in his remand report stated that the letter dated 17.10.2019 not served and also submitted the copy of Dak receipt register. In this connection it is stated that the submission of the Ld. A.O. is not correct, this letter was served on to the Ld. A.O., which is very well evident from the proof of service provided by the Courier agency, the copy of the same were submitted to the Ld. CIT(A) but not appreciated, the same are attached herewith for ready reference of the Hon’ble Bench.
From the perusal of the same the Hon’ble Bench will observe that the submission of the Ld. A.O. is not correct. The findings of the Ld. CIT(A) is unjustified and also not in accordance with the law as well as various judicial pronouncements. It is need less to submit that the Judgment of the Hon’ble Supreme Court and the other higher courts are having binding nature on all the subordinate authorities. But here in this case this principle is also completely disobeyed.
The Ld. CIT(A) not considered the evidences submitted by the assessee during the course of hearing. The assessee submitted the proof of receipt of the letter sent in the shape of the copy of receipts provided by the courier company, but the Ld. CIT(A) has completely brushed aside the evidences so submitted by the assessee and approved the act of the Ld. A.O., which is unjustified and contrary to the law.
Here in this case the A.O. has failed to provide the reasons despite of request of the assessee made to her twice, first just after filing of return u/s 148 and again during the course of assessment. It is needless to submit that without supply of reasons the entire assessment proceedings should be liable to be declared as illegal and bad in the eye of law. Therefore, it is humbly submitted that looking to the above mentioned judgments as well as the submission, facts and circumstances of the case, the assessment so completed by the A.O. may kindly be declared illegal and against the law and deserves to be quashed.
It is also worthwhile to submit that the assessment file of the assessee was inspected by the undersigned along with Shri Rahul Sharma C.A. on 26.02.2020 about 4.00 P.M. and it was found during the course of inspection that the Notice issued u/s 148 was issued without getting the prior sanction/approval of the Commissioner of Income Tax (Exemption).
The A.O. referred the proposal to the Addl. Commissioner of Income Tax (Exemption) on 22.03.2019 for getting the sanction to issue the notice u/s 148 to 10 persons including the assessee. The Additional Commissioner vide letter dated 22.03.2019 No. 1079 submitted the proposal of the Income Tax Officer (Exemption) for sanction to issue notice u/s 148 on very same day i.e. on 22.03.2019 to the Commissioner of Income Tax (Exemption), the same was entered at S. No. 4548 dated 22.03.2019.
The Commissioner of Income Tax (Exemption) accorded the approval and informed this fact to the Additional Commissioner of Income Tax (Exemption) vide letter No. 9548 dated 26.03.2019 and received at the office of the Additional Commissioner of Income (Exemption) office on 26.03.2019 entered as S. No. 3951.
The Additional Commissioner of Income Tax (Exemption) conveyed the approval / sanction of the Commissioner of Income Tax (Exemption) to the Income Tax Officer (Exemption),Ward-2, Jaipur vide letter No. 1093 dated 26.03.2019 and the same was received to the office of the Income Tax Officer (Exemption),Ward-2, Jaipur on 27.03.2019 and the seal of office of ITO dated 27.03.2019 was there on this letter.
This fact can be easy to understand in the following table:-
