Case Law Details
Santosh Khunteta Vs ITO (ITAT Delhi)
Synopsis of Appeal Submission:
1. Facts of the Case: The present appeal has been preferred by the appellant, in respect of the Reassessment Order for the AY 2010-11, passed u/s 147/143(3), by the learned Assessing Officer, ITO, Ward 29(5), New Delhi, dated 29.12.2017, and partly upheld by the learned CIT (Appeals), National Faceless Appeal Centre, vide the appeal order dated 11.9.2023. The appellant is a well reputed medical practitioner. The appellant is a regular taxpayer assessee and has been regularly filing her return of income since last more than 20 years For the AY 2010-11, the appellant had filed its return of income on 31.07.2010 declaring an income of Rs. 5,46,080/-. The case was reopened u/s 148 of the Income tax Act on 29.3.2017, on the basis of an information received from ITO (I&CI), Jodhpur vide their letter No. ITO (I& CI)/JDH/2016-17/2166 dated 30.3.2017 and received by the AO of the appellant on 30.3.2017 through email. The ld. AO, vide his assessment order dated 29.12.2017, had made several additions amounting in total to Rs. 51,23,000/- u/s 56 of the Income Tax Act. On being aggrieved by the same, the appellant has, therefore, filed present appeal against the reassessment order passed by the AO and as partly upheld by the learned CIT(Appeals) NFAC, Delhi.
2. The appellant has raised 7 grounds of appeal. First four grounds are legal grounds challenging the validity and jurisdiction of the impugned reassessment notice, reassessment proceedings and the subject reassessment order for the AY 2010-11, passed u/s 147/143(3) of the Income Tax Act. The remaining 3 grounds are addressing the (de)merits of the impugned additions.
3. First four grounds of appeal are legal grounds and go to the root and the jurisdiction of the matter, and as such these are being represented first.
4. Ground 1 The main crux of ground no 1 of appeal is that on the date of issuance of Notice u/s 148 of the Act, on 29.3.2017, (copy of the Notice u/s 148 issued on 29.3.2017 enclosed at page no. 1 of the Paper Book), the learned AO was not having any information, material or evidence in his possession, so as to form a Reason to Believe that any income of the appellant for the subject AY 2010-11 had escaped assessment, so as to warrant reopening of the said case.
This is duly evident from the copy of the reasons for reopening (enclosed at page no 4 of paper Book), as supplied by the AO, during the course of the impugned reassessment proceedings, in response to the request letter of the appellant.
A careful perusal of the said reasons for reopening the assessment, makes it abundantly evident that the sole basis for the initiation of reassessment proceedings for the AY 2010-11, was some alleged information received from the ITO (I & CI), Jodhpur pertaining to the purchase of immovable property by the appellant. It is pertinent to mention here that in the very first sentence of the said reasons for reopening, it has been acknowledged by the ld. AO that some information was received from ITO (I&CI), Jodhpur vide their letter No. ITO (I & CI)/JDH/2016-17/2166 dated 30.3.2017 through email.
Therefore, it is duly evident that at the time of issuing Notice u/s 148 of the Act on 29.3.2017, concerning the initiation of the reassessment proceedings against the appellant, for the AY 2010-11, Ld. AO was not in possession of the so called “information” received from the ITO (I & CI), Jodhpur, on the very basis of which the Ld. AO could have formed the reason to believe to justify the initiation of the impugned reassessment proceedings, because as per the ld. AO’s Acknowledgement in the Reasons for Reopening the assessment only, the said information was received on 30.3.2017 vide letter No. ITO (I & CI)/JDH/2016-17/2166 dated 30.3.2017 through email.
It is pertinent to mention here that the appellant had duly raised the said legal objection against the reopening of the assessment for the AY 2010-11, vide its written submissions dated 11.5.2017, 27.7.2017 (enclosed at pages 5-10) and further submissions dated 20.11.2017 and 27.11.2017, enclosed at page nos. 15-35) of Paper Book, for ready reference.
However, the ld. AO had simply brushed aside the said objections by stating that the date printed on notice was typographical error the notice was issued on 31.03.2017 by speed post and through mail on your E-mail ID xxxxxxx.com……”
The ld. CIT(Appeals) in his appeal order has not agreed with our above ground no. 1. In paras 5.1.2, 5.1.3 and 5.1.4 of his appeal order he has stated that,
“from the appellant’s submission it indicates that another notice under section 148 of the Act was issued on March31,2017 replacing the notice that suffered from defect. Thus, it is evident that notice in question was issued under section 148 of the Act within time limit set forth in section 148 of the Act and, therefore, no prejudice was caused to the appellant with respect of limitation.
The mistake or error in mentioning date in the notice was merely a technical defect. It is not the case of the appellant that no notice was served. The appellant got the opportunity to object to irregularity in course of assessment proceedings. In fact, the appellant raised the objection to irregularity and the assessing officer duly dealt with his objection.
Based on the above facts, I am of the considered view that the notice in question was issued in due compliance of the provision of the section 148 of the Act. Hence, the appellant suffered no prejudice. The reassessment proceeding cannot be invalidated when there has been no prejudice to the appellant. As a result, ground No.1 taken in the appeal is not successful on this ground and hence dismissed.”
In this regard it is submitted that the appellant had not stated or suggested anywhere in its appeal submissions submitted before the ld. CIT (Appeals) in the faceless hierarchy that another notice u/s 148 dated 31.3.2017, had been issued to the appellant.
It is a matter of fact that no second notice u/s 148 dated 31.3.2027 was being issued by the AO to the appellant. The AO had simply mailed the very same Notice u/s 148 dated 29.3.2017 to the appellant’s email id on 31.3.2017. The copy of the said email being sent by the AO on 31.3.2017 and containing the attachment of the very same Notice u/s 148 dated 29.3.2017, is enclosed as per Annexure 1 of this Brief/Synopsis, for Your Honours’ ready reference. The said email is also being offered to verify in original from the mobile phone of the standing counsel of the appellant. Thus, the assumption made in the CIT appeal order that another Notice u/s 148 dated 31.3.2017 was issued replacing the notice that suffered from defect, is factually misconceived and is contrary to the actual facts of the case.
Further, even for academic considerations, if it is assumed that another Notice u/s 148 dated 31.3.2017 was indeed issued by the AO, then also, in view of the well-settled and established legal position that during subsistence of a reassessment proceedings, another reassessment notice cannot be issued for same assessment year, and thus the second notice is itself a nullity in the eyes of Law. Reliance in this regard is placed upon the binding legal precedent of the jurisdictional hon’ble Delhi High Court in the cases of “Kamdhenu Enterprises Ltd v. ITO” [2023] 146 taxmann.com 417 (Delhi) and “CIT v. Sanjay Kumar Garg [2015] 64 taxmann.com 334 (New Delhi) [copy enclosed as per Annexure-2 of the Brief/Synopsis].
Further regarding the contention of the ld. AO that the date of 29.3.2017 mentioned in the Notice u/s 148, was only a typographical error and as also upheld by the ld. CIT(Appeals) on the reasoning that it is merely a technical defect and had not caused any prejudice to the appellant, it is submitted that the notice issued u/s 148 of the Act and the date of issue mentioned in that notice, bears a legal sanctity and once a notice has been issued by the assessing authority on a particular date, then it can’t be brushed aside/ignored or substituted by a subsequent email or even new notice, by merely stating that the date mentioned on the original notice was a typographical error. Such a defect is not merely a typographical error or a technical defect but infact it goes to the very root of the assumption of unlawful jurisdiction by the AO in initiating the said reassessment proceedings. It is a well settled and established legal position that any jurisdictional defect in the Notice issued u/s 148 of the Act, more particularly the date of issuance of such notice, can’t be rectified subsequently, or even brushed aside simply by stating that it was a typographical error.
The assumption u/s 147 of the Act for reopening the assessment/ reassessing the income, can be lawfully exercised by the Assessing Authority only on formation of a reason to believe that any income of the assessee has escaped assessment. In the absence of formation of such reason to believe by the AO, provisions u/s 147 of the Act, cannot be invoked and resorted to by the AO.
In this regard, some of such binding judicial pronouncements of the Hon’ble Supreme Court and the Hon’ble High Courts are cited as under:
(i) Johri Lal (HUF) vs. CIT, 88 ITR 439 (SC).
(ii) Sheo Nath Singh vs. AAC, 82 ITR 147 (SC).
(iii) Ganga Saran & Sons (P) Ltd. vs. ITO, 130 ITR 1 (SC).
(iv) ITO vs. Lakhmani Mewal Das, 103 ITR 437(SC).
(v) Commissioner of Income Tax v. G&G Pharma (2015) 384 ITR 147 (Del.)
(vi) CIT vs Insecticides India Ltd 357 ITR 330, Delhi High Court;
(vii)CIT vs SFIL Stock Broking Ltd 325 ITR 285, Delhi High Court;
(viii)Sarthak Securities Co. (P) Ltd vs ITO, 329 ITR 110, Delhi High Court;
(ix) PCIT vs RMG PolyVinyl (I) Ltd Delhi High Court;
(x) Oriental Insurance Company Limited v. Commissioner of Income Tax 378 ITR 421 (Del).
Held by Hon’ble Delhi ITAT:
Operating para of the Judgement:
“7. From the plain reading of the notice u/s 148 of the Act dated 29/03/2017 and the reasons recorded u/s 147, the inference can be drawn that, as on the date of issuance of notice u/s 148 of the Act dated 29/03/2017, the Ld. A.O. was not having any information, material or evidence in his possession so as to form a Reason to Believe that any income of the assessee for the year under consideration had escaped assessment. It is the case of the Department that there was mistake in mentioning the date as ‘29/03/2017’ in the notice issued u/s 148 of the Act, therefore, by rectifying the said error another notice was issued again on 31st March, 2017 replacing the notice that suffered from defect. The said contention of the Ld. Departmental Representative cannot be accepted as even the e-mail sent on 31st March, 2017 was having an attachment that of the very same notice dated ‘29/03/2017’ which can be corroborated from the screen shot of the e-mail produced by the assessee along with the synopsis & the downloaded attachment of the notice. Furthermore, the Department has not produced any such notice issued u/s 148 of the Act dated 31/03/2010 which was claimed to have been issued to the assessee. Thus, it can be safely concluded that as on the date of issuance of notice u/s 148 of the Act dated 29/03/2017, the Ld. A.O. was not having any information, material or evidence in his possession as to form the reason to believe that any income of the assessee for the subject Assessment Year had escaped assessment as the information itself has been received by the A.O. on 30/03/2017. Thus, in our opinion the reassessment proceedings initiated by the A.O. are erroneous. Accordingly, the Assessment Order and the order of the Ld. CIT(A) are hereby set aside.”
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the Assessee against the order of Ld. CIT(A)/National Faceless Appeal Centre, Delhi [“NFAC” for short], dated 11/09/2023 for the Assessment Year 2010-11.
2. The Grounds of Appeal are as under:-
“1. Based on the facts and circumstances of the case, the appellant respectfully submits that:
(i) That the learned CIT(APPEALS), NFAC, Delhi has grossly erred both in law and on facts in upholding the unlawful and factually misconceived reassessment order u/s 147 being passed by the learned assessing officer for the AY 2010-11, and not appreciating the fact that as on the date of issue of notice u/s 148 of the Income Tax Act, on 29.3.2017, the Ld. AO was not having any material, information or evidence whatsoever, in order to form his independent reasonable belief that any income of the appellant had escaped assessment, as the information from ITO(I and C1.), Jodhpur, vide their letter no. ITO(I and CI)/JDH/2016-17/2166, which formed the sole basis for initiating the reassessment proceedings, had been received by the Ld. AO only on 30.3.2017, as acknowledged by the Ld. AO in his reasons for reopening the assessment, recorded u/s 147 of the Income Tax Act.
(ii) That the learned CIT (Appeals), NFAC, Delhi has erred both in law and on facts in upholding the unlawful and factually misconceived reassessment order u/s 147 being passed by the learned assessing officer for the AY 201011, and not appreciating the fact the Ld. AO has passed the impugned reassessment order u/s 147 of the Income Tax Act, for the AY 2010-11, without forming an independent reason to belief that income had escaped assessment and without any independent application of mind.
(iii) That the learned CIT (Appeals), NFAC, Delhi has grossly erred both in law and on facts in upholding the unlawful and factually misconceived reassessment order u/s 147 being passed by the learned assessing officer for the AY 2010-11, and not appreciating the fact that the competent Income Tax Authority has granted the mandatory sanction/approval for issuance of Notice u/s 148 to the AO, for the AY 2010-11, in a completely mechanical manner and without complying with the provisions of section 151 of the Income Tax Act, 1961.
(iv) That the learned CIT (Appeals), NFAC, Delhi has grossly erred both in law and on facts in upholding the unlawful and factually misconceived reassessment order u/s 147 being passed by the learned assessing officer for the AY 2010-11 and not appreciating the fact that the exorbitant and unlawful additions being made by the Ld. AO on secondary grounds, are not legally sustainable, as the Ld. AO had not made any additions in respect of the primary ground of alleged unexplained sources of funds of Rs. 23,50,000/-, as per the reasons for reopening the assessment for the AY 2010-11, recorded u/s 147 of the Income Tax Act, 1961.
v) That the learned CIT (Appeals), NFAC, Delhi has erred both in law and on facts in remanding back the reassessment order u/s 147 to the Assessing Officer for fresh adjudication, in respect of the arbitrary and unlawful addition of Rs. 8,15,000/-, made by the Assessing Officer as undisclosed income u/s 56 of the Income Tax Act, on account of assuming the sale proceeds of equity shares as unexplained, contrary to the documentary evidences, being furnished and placed on record before the Ld. AO, and not appreciating the fact that all the relevant and applicable supporting documentary evidences in respect of the said addition had already been produced and placed on record by the appellant, during the re-assessment as well as appellate proceedings.
(vi) That the learned CIT (Appeals), NFAC, Delhi has erred both in law and on facts in upholding the unlawful and factually misconceived addition of Rs. 22,38,000/- being made by the Assessing Officer, as undisclosed income u/s 56 of the Income Tax Act, in the reassessment order u/s 147 being passed by the learned assessing officer for the AY 2010-11, on account of assuming the refund received by the appellant from M/s Vekunth Dham CGHS Ltd, as unexplained, contrary to the documentary evidences, being furnished and placed on record before the Ld. AO.
(vii) That the learned CIT (Appeals), NFAC, Delhi has erred both in law and on facts in remanding back the reassessment order u/s 147 to the Assessing Officer, in respect of the arbitrary and unlawful addition of Rs. 20,70,000/-, being made by Assessing Officer as undisclosed income u/s 56 of the Income Tax Act, on account of assuming the bank account transfers of the appellant, as unexplained, contrary to the documentary evidences, being furnished and placed on record before the Ld. AO, and not appreciating the fact that all the relevant and applicable supporting documentary evidences in respect of the said addition had already been produced and placed on record by the appellant, during the reassessment as well as appellate proceedings.
The Appellant craves leave to add, alter, vary, or amend the above ground of appeal, at or before the time of hearing of appeal.”
3. Brief facts of the case are that, the assessee is a medical practitioner, filed his return for Assessment Year 2010-11 declaring an income of Rs. 5,46,080/-. The case was reopened u/s 147 of the Income Tax Act, 1961 (‘Act’ for short) and the A.O. vide assessment order dated 29/12/2017 made addition of Rs. 8,15,000/- u/s 56 which was routed through the Demat accounts and then claimed as Long Term Capital Gain, addition of Rs. 22,38,000/- made u/s 56 of the Act as the same was unexplained, further made addition of Rs. 20,70,000/- u/s 56 of the Act as income from other sources not disclosed to the Department. Aggrieved by the assessment order dated 29/12/2017, the assessee preferred an Appeal before the CIT(A). The Ld. CIT(A) vide order dated 11/09/2023, sustained the additions of Rs. 8,15,000/- made by the A.O. as undisclosed income u/s 56 of the Act on the ground that the sale proceeds of equity shares are unexplained. Further, upheld the addition of Rs. 22,38,000/- made u/s 56 of the Act and also confirmed the addition of Rs. 20,70,000/- made as undisclosed income u/s 56 of the Act. Aggrieved by the order of the CIT(A) dated 11/09/2023, the assessee preferred the present Appeal on the grounds mentioned above.
4. The Ground No. 1 is regarding the legal/technical issue of defective notice issued u/s 148 of the Act. The Ld. Counsel for the assessee submitted that the issuance of notice u/s 148 of the Act dated 29/03/2017 by the A.O. without having any information, material or evidence in his possession so as to reason to believe that any income of the assessee for the Assessment Year 2010-11 had escaped assessment, so as to reopen the case of the assessee. The Ld. Counsel drawn our attention to the notice dated 29/03/2017 and also Reasons for reopening of the assessment wherein the A.O. received the information only on 30/03/2017, i.e. subsequent to the issuance of notice u/s 148 of the Act. Thus, the Ld. Counsel for the Assessee submitted that A.O. as on the date of issuing the notice dated 29/03/2017 had no information or material in his possession to reason to believe that any income of the Assessee for the year under consideration had escaped assessment. The assessment u/s 147 of the Act for reopening of the assessment or reassessing the income can be exercised by the A.O. only on the information of a reason to believe that any income of the assessee has escaped assessment and in the absence of formation of such reason to believe by the A.O, provisions of Section 147 cannot be invoked. The Ld. Counsel has relied on following judicial pronouncement of Hon’ble Supreme Court and Hon’ble High Court.
(i) Johri Lal (HUF) vs. CIT, 88 ITR 439 (SC).
(ii) Sheo Nath Singh vs. AAC, 82 ITR 147 (SC).
(iii) Ganga Saran & Sons (P) Ltd. vs. ITO, 130 ITR 1 (SC).
(iv) ITO vs. Lakhmani Mewal Das, 103 ITR 437(SC)
(v) Commissioner of Income Tax v. G&G Pharma (2015) 384 ITR 147 (Del.)
(vi) CIT vs Insecticides India Ltd 357 ITR 330, Delhi High Court.
(vii) CIT vs SFIL Stock Broking Ltd 325 ITR 285, Delhi High Court;
(viii) Sarthak Securities Co. (P).Ltd vs ITO, 329 ITR 110, (Delhi HC);
(ix) PCIT vs RMG Poly Vinyl (1) Ltd Delhi High Court;
(x) Oriental Insurance Company Limited v. Commissioner of Income Tax 378 ITR 421 (Del).
5. Per contra, the Ld. Departmental Representative submitted that the notice dated 31st March, 2010 has been issued u/s 148 of the Act by rectifying the mistakes in issuing the notice dated 29/03/2010 and the subsequent notice dated 31/03/2010 was issued well within the limitation and mere by issuing the second notice, no prejudice was caused to the assessee and mistake or the error mentioning the date in the earlier notice was a technical defect, which has been corrected. Further submitted that it is not the case of the assessee that no notice was served and the assessee has availed the opportunity of being heard during the course of the assessment proceedings and the assessment order has been passed after hearing the assessee, therefore, the Ground No. 1 of the assessee deserves to be dismissed.
6. We have heard both the parties and perused the material available on record. As per the Page No. 1 of the paper book wherein the assessee produced the notice u/s 148 of the Act wherein the date of issuance of notice is mentioned as ‘29/03/2017’ which is reproduced as under:-
The assessee has also produced reasons for reopening at Page 4 of the paper book. As per the reasons for reopening, the A.O. ‘received information from ‘ITD (I&CI) Jodhpur vide their letter No. ITO (I &CI)/JDH/2016-17, 2166 dated 30/03/2017 through e-mail’. The reasons for reopening is produced as under:-
7. From the plain reading of the notice u/s 148 of the Act dated 29/03/2017 and the reasons recorded u/s 147, the inference can be drawn that, as on the date of issuance of notice u/s 148 of the Act dated 29/03/2017, the Ld. A.O. was not having any information, material or evidence in his possession so as to form a Reason to Believe that any income of the assessee for the year under consideration had escaped assessment. It is the case of the Department that there was mistake in mentioning the date as ‘29/03/2017’ in the notice issued u/s 148 of the Act, therefore, by rectifying the said error another notice was issued again on 31st March, 2017 replacing the notice that suffered from defect. The said contention of the Ld. Departmental Representative cannot be accepted as even the e-mail sent on 31st March, 2017 was having an attachment that of the very same notice dated ‘29/03/2017’ which can be corroborated from the screen shot of the e-mail produced by the assessee along with the synopsis & the downloaded attachment of the notice. Furthermore, the Department has not produced any such notice issued u/s 148 of the Act dated 31/03/2010 which was claimed to have been issued to the assessee. Thus, it can be safely concluded that as on the date of issuance of notice u/s 148 of the Act dated 29/03/2017, the Ld. A.O. was not having any information, material or evidence in his possession as to form the reason to believe that any income of the assessee for the subject Assessment Year had escaped assessment as the information itself has been received by the A.O. on 30/03/2017. Thus, in our opinion the reassessment proceedings initiated by the A.O. are erroneous. Accordingly, the Assessment Order and the order of the Ld. CIT(A) are hereby set aside by deleting the Ground No. 1 of the assessee. Since we have allowed the Ground No. 1 and set aside the assessment order and the order of the Ld. CIT(A) other Grounds raised by the Assessee are not adjudicated.
8. In the result, Appeal filed by the assessee is allowed.
Order pronounced in open Court on 13th JUNE, 2024.
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[Appeal Represented by Shri Mayank Mohanka, FCA, Partner S M Mohanka & Associates, Founder Tax Aaram India Pvt Ltd]
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