Draft Submissions on Section 148A(b) Notice Issued Based on wrong Information

Summary: The appeal concerns the notice issued under Section 148A(b) of the Income Tax Act, 1961, dated 19th March 2022, to Smt. XXXXX for the assessment year XXXXX. The appellant challenges the notice on grounds of incorrect information provided by the Assessing Officer (AO). Specifically, the notice incorrectly states a cash deposit of Rs. 1,20,66,500, whereas the actual cash deposit is Rs. 71,32,000, as evidenced by the bank statement. The appellant argues that the notice was issued based on erroneous data without independent verification by the AO, violating the provisions of the Income Tax Act. Moreover, the notice’s reliance on the department’s automated system (NMS) without inquiry or tangible material makes it invalid. The appellant also highlights that the cash deposited in the bank was for business purposes, not as a passive asset, and thus should not be treated as taxable income. Relevant case laws, such as CIT v. S.S.R.R.S. Ltd. and CIT v. Molasses Co. (P.) Ltd., are cited, which clarify that business-related deposits should be treated as part of the business’s working capital and not as a separate investment or asset. The failure of the AO to examine the full bank account and provide tangible material with the notice is further criticized, referencing the Supreme Court’s judgment in UOI v. Ashish Aggarwal. The appellant requests the cancellation of the notice and the assessment, asserting that the reopening was based on borrowed satisfaction and without a proper application of mind. Additionally, the appeal addresses procedural errors, such as the absence of approval from the Principal Chief Commissioner of Income Tax (PCCIT), which is a mandatory requirement for reopening an assessment. The appellant argues that the notice was issued on the basis of conjecture and suspicion, lacking any substantive material to justify the reassessment. Based on these points, the appellant seeks to nullify the entire assessment, asserting that the action taken by the AO was unfair and against the spirit of the law. The appeal stresses the importance of conducting independent inquiries and adhering to legal requirements for valid assessments under the Income Tax Act.

Draft Written submissions regarding 148A (b) Notice issue on the basis of wrong Information

WRITTEN SUBMISSIONS AS PER THE GROUNDS OF APPEAL

BEFORE THE HON’BLECOMMISSIONEROFINCOME TAX (APPEALS), NFAC, New Delhi

In the case of Smt. XXXXXXX for the A.Y.XXXXX

AGAINST the ORDER PASSED U/S 147/144/144B OF INCOME TAX ACT, 1961 Dt. XXXXX.

GROUNDS OF APPEAL

1. That the issue of Notice u/s 148A(b) dated 19.3.2022 is bad in law and deserves to be cancelled due to following reasons:

a) Notice u/s 148A(b) was issued on 19.3.2022 containing wrong information of cash deposit of Rs. 1,20,66,500.00 though the actual cash deposit with the bank is Rs. 71,32,000.00

The actual cash deposited with the XXXXX Bank of the assessee a/c no. XXXXX is Rs. 71,32,000.00 which is apparently clear from the bank statement. The cash deposited with bank is not Rs. 1,20,66,500 as the same has been mentioned in your notice u/s 148A(b) (CB-9 to 10) of the IT Act, 1961 dated 19-3-2022. The information as provided by the ld. Assessing officer is wrong on the basis of which notice u/s 148A (b) of the Act has been issued.

At point No. 3 of the notice it has been mentioned that “asset” shall include deposits in the bank account. The deposit of cash in the bank account is not an asset as the cash has been deposited with the bank frequently for making the payment of the goods purchased by the assessee for her business. It is not a Fixed Deposit. The cash which has been deposited for the purpose of business is not and never an asset .The balance with the bank existing on the last date i.e. on 31.3.2015 is Rs. 4053.00. Not and never on a single day it has exceeded Rs. 50 Lakhs. Section 149(1)(b) is not applicable in the case of the assessee . With a small deposit of Rs. 71,32,000.00 in cash with the bank an income exceeding 50 lakhs or 50 lakhs cannot be determined . The findings of the Assessing officer is false, baseless and not as per law. The notice seems to be invalid and hence the entire assessment deserves to be made null and void .The case was selected for issue of notice u/s 148A (b) of the act on the basis of NMS in line with Risk Management Strategy formulated by the CBDT but no enquiries were made by the AO before issue of notice .It was issued straight forward without making independent enquiries and relied only on the information of the department. The AO has not examined the full bank Account of the Assessee before issue of notice u/s 148A (b) of the Act which action is not in accordance with law.

If the cash deposit is made for the purpose of business (and not simply as a deposit with the bank for earning interest or as an investment), there are some important judgments that have addressed the treatment of such deposits in the context of tax law. Below are a couple of relevant case laws that could offer insight into how the courts have handled situations where cash is deposited for business purposes.

1. CIT v. S. S. R. R. S. Ltd. (2008) 174 Taxman 125 (Madras High Court)

Issue: The issue in this case was whether a deposit made by a company, which was meant for business purposes, could be considered as part of its working capital and whether it would be treated as an asset for income tax purposes.

Judgment: The Madras High Court held that when money is deposited with a bank for business purposes, the amount should be treated as part of the working capital of the business. It was noted that if the deposit was directly related to the business activity, such as security for obtaining goods or services, then it should be treated as part of the assets of the business and not as a separate investment or financial asset. The court found that the money was meant for business, and thus the income arising from the use of such money should be treated accordingly.

The court emphasized that deposits made for business purposes, directly related to the operation of the business, should not be classified merely as a passive investment. If the cash deposit is tied to the business’s operational needs, it can be treated as a business asset.

2. CIT v. XXXXX Molasses Co. (P.) Ltd. (1970) 78 ITR 474 (SC)

Issue: In this case, the Supreme Court addressed the issue of whether a cash deposit made by a company for business purposes should be considered part of the business assets for tax purposes, particularly when the deposit was made in the context of securing business-related arrangements.

Judgment: The Supreme Court ruled that when a company makes a deposit in connection with business activities, such as a deposit for securing an advantage or to carry out a business deal (for example, securing goods or services), the deposit can be treated as part of the business’s assets. The court specifically noted that deposits made for commercial reasons are not separate from the business but are part of the business transactions and, therefore, must be accounted for as such.

The judgment highlights that cash deposits made for securing business transactions (e.g., business agreements, contracts, etc.) are integral to the business operations and should be treated as part of the business assets. The deposit is not just a financial holding but a necessary part of the business infrastructure

3. K. R. V. Ayyar v. CIT (1980) 122 ITR 328 (Madras HC)

Issue: In this case, the Madras High Court considered whether cash deposits made by a business owner for purposes directly related to business operations (e.g., to secure a trade or to guarantee payment) could be treated as a part of the business’s assets for tax purposes.

Judgment: The court held that deposits made for business purposes—such as securing business agreements or guaranteeing certain business-related commitments—could indeed be classified as business assets. The deposit was not for investment or personal purposes but directly related to facilitating business operations. As such, the court treated it as an asset linked to the business, rather than a passive deposit.

The key lesson from this judgment is that cash deposits, when made with the primary intention of facilitating or securing business activities, are treated as part of the operational framework of the business and must be considered business assets.

Conclusion:

From these judgments, it is clear that cash deposits made for business purposes—such as securing business arrangements, paying for services, or guaranteeing future performance— should generally be treated as part of the business’s working capital or assets, not as a mere financial investment or deposit with a bank for passive earning.

If your cash deposit is made for a similar purpose, as in the case of securing or advancing business activities (such as a security deposit for goods or services), you may use these judgments as a basis to argue that such cash deposits are assets and should be treated accordingly for tax purposes.

In the case of the assessee the cash was deposited with her bank account for making the payment to the vendor i.e. XXXXXX. This is required for the purpose of business not as a personal investment. This cash deposit is not an asset as per the language of Explanation of section 149(1) (b). Hence the reopening is bad.

b) No tangible material was provided with Notice u/s 148A (b) which is also clear violation of Section 148A (b).

No tangible material relied on & complete information was provided with the notice u/s 148A (b) which is also clear violation of section 148A (b).

The notice was issued on the borrowed satisfaction without making independent enquiries. The notice issued is bad in law as the provision was not followed strictly.

Material and information could not be provided with the notice issued on 19.03.2022 and it is in violation of guidelines issued in the judgement of the Hon’ble SC in the case of UOI, Ashish Aggarwal Dt. 4.05.2022 and hence as such the notice issued u/s 148A (b) is bad in law which shall lead to the illegal issue of order u/s 148A (d) of the Act and issue of notice u/s 148 of the Act. The Assessing Officer completely relied on the insight portal (CB- 65 to 68) of the assessee at CIB-410 and AIR-001 which contains information of cash deposited with the XXXXX Bank (Now XXXXX Bank) but the information is wrong as the assessee has never deposited cash with her bank account more than Rs. 61,32.000.00 and the Ld. AO was not having any tangible material like bank statement of the assessee . It was obtained by the assessee writing a letter to the bank dt. 15.02.2023 u/s 133(6) of the Act. Copy enclosed.

Supply of Information and Material relied upon by the Revenue:

In the case of M/s Technicon Holdings Pvt.Ltd. , Vs ACIT , Circle -25(1) ( ITAT New Delhi) (ITA No. 465/ Del/2019 ( Assessment Year 2010-11 ):

The Delhi bench of the ITAT has held that the reassessment under section 147 and 148 of the Income Tax Act, 1961 cannot be held valid in the absence of an independent inquiry by the Assessing Officer who merely relied on the information received from the investigation wing to conclude the proceedings. So only providing information is not sufficient and provision of tangible material based on which the AO has framed opinion is also required to be provided. Not providing the same makes the proceedings bad in law.

As such the issue of notice u/s 148A (b) is bad in law and hence the reopening is bad in law. There was no enquiries which were made by the Ld. JAO and was having no tangible material. The case was reopening

Without application of mind. The issue of notice u/s 148 is bad in law and spirits. The assessee relies on the following judgement.

The assesse has relied on the judgment of High court of Delhi in the case of “Signature Hotels (P) Ltd. 338ITR 51 (Delhi)” (Supra).

(c) Copy of Approval of PCCIT, Delhi was not provided but only mentioned on Notice.

Further, the approval obtained from Pr. CCIT, Delhi was never supplied to the assesse before assessment neither on mail, nor on Income Tax portal and not in person which is mandatory requirement and hence the entire assessment is prayed to be made null and void. Before reopening of the assessment and finalizing the assessment the Ld. assessing officer has to follow the mandatory provisions as per law which he failed to do so, hence it is prayed to make the assessment null and void.

Re-opening based on borrowed satisfaction of the Assessing Officer is not valid. Moreover, information is not sufficient. Hence, the reopening is bad. Only Information is available with the AO but not contents of the information who initiated the reassessment proceedings. That the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction. That it is a case of mechanical action on the part of the Ld. Assessing Officer as there is non- application of mind much less independent application of mind so as to show that he formed an opinion based on any material that assesse has deposited cash with the bank for a sum of Rs. 1,20,66,500.00 and the entire cash deposited is income of theassessee . This action of the AO is quite unfair and against the spirit of law. Hence the entire assessment is prayed to be made null and void

(d) The said notice was illegal as the Ld. Assessing Officer himself was not sure about the amount of cash deposited with the bank and no bank account statement was with the Ld AO when this notice was issued.

The cash deposited with the bank is Rs. 71,32,000.00 but not 1,20,66,500.00 . There was wrong information with the Ld JAO and on the basis of this wrong information without making independent enquiries he issued notice u/s 148A(b) of the Act . No enquiries were made by the AO u/s 148A (b) of the Act. The entire assessment framed on the basis of wrong information and no enquiry conducted is bad in law and is prayed to be made null and void.

(e) The notice was issued on whims, conjectures, surmises & suspicion.

The notice wasissued on whims, conjectures, surmises and suspicion. It is also settled law that no addition can be made merely on the basis of surmises and conjectures and even on suspicion. After all, the position of the Assessing Officer is quasi-judicial position and therefore, the finding recorded by the Assessing Officer and fastening of tax liability has to be based on cogent material and evidence, Hon’ble Courts have gone to the extent of holding that suspicion howsoever grave cannot partake the character of any evidence. This has been so held by Hon’ble Supreme Court in the case of Uma Charan Shaw & Bros. Co. vs. CIT reported in 37 ITR 271. This position of law has been reiterated by Hon’ble Delhi High Court in the case of CIT vs. Kapil Nagpal [2015] 63 taxmann.com 366 (Delhi) on 11.09.2015— (Delhi High Court).

Therefore, in the absence of any cogent evidence against the appellant, the addition could not be made and since made, it is prayed that the same may please be deleted

(f) The notice was issued on the basis of borrowed satisfaction and wrong information.

Hence it is borrowed satisfaction of the AO which was the basis of the Ld JAO to reopen the case of the assesse which shall not stand the test of law. The assesse relies on the following judgement in the case of

Hari kishan Sunder Lal virmani Vs DCIT reported in 394 ITR 146 Gujarat, The court held that from the reasons recorded , if the same are on borrowed satisfaction without framing an independent opinion , the assumption of the jurisdiction to reopen the assessment under section 147 was bad in law .

In support of such submissions, reliance is placed on the decision of this Court in case of Bharatkumar Nihalchand Shah versus Income Tax Officer dated 07.03.2023 in Special Civil Application No.5353 of 2022 wherein, it is held that nonspecific and general reasons without establishing rational nexus between transaction and escapement of income are not valid for assumption of jurisdiction to reopen the assessment.

(g) Even no enquiries were conducted by the Ld. Assessing Officer as required u/s 148A (a) of the Act before issue of notice u/s 148A (b) of the Act Dt. 19.03.2022.

No enquiries were made by the assessing officer under the old provision existing till 31.3.2021 before issue of notice u/s 148A (b) dt. 19.03.2022 and even later on as required u/s 148A (a) as per the Hon’ble SC guidelines in the case of UOI Vs Ashish Aggarwal dt. 4.5.2022. Without making enquiries, providing complete information and material particulars the issue of notice u/s 148 is vague itself and hence the entire assessment seems to be vague. The entire assessment is vitiated on the basis of reopening of the assessment on the basis of incomplete information and not providing relevant information to the Assessee.

The assesse relies on the following judgement:

Ever shine Recreation Pvt. Ltd. Vs DCIT, (ITAT Chandigarh) Dt. 15.09.2023.

The incomplete information cannot be made basis for reopening of the assessment in the case of the assesse. Principal of natural justice has been totally denied to the assesse. Reopening was made on the wrong and irrelevant fact which is not valid.

(2) Order u/s 148A (d) dated 27.03.2022 issued &not served on assessee in person and by speed post on 27.3.2022 was also illegal and deserves to be cancelled due to following reasons: (a)The order was passed with a pre-determined mind set, so deserves to be cancelled.

And without acknowledging reply filed by the assessee completely. The order was passed covering under the definition of asset laid down in Explanation to section 149(1) (b) of the Act. Cash deposit with the bank is more than 50 lakhs but deposits are not more than 50 Lakhs. Deposit means Fixed Deposits. The Ld. AO failed to understand the intention of the legislature for enactment of this law. Cash deposits for the purpose of business are not covered under this provision of section 149 which has been mentioned at Para No. 4, Page No. 2 of the order Dt. 27.03.2022 passed u/s 148A (d) of the Act. The order contains no approval ref. No from PCCIT, Delhi and no approval has been provided to the assessee at the time of opening of the assessment and also during the course of assessment and even after assessment and even when assessee applied for the same Dt. 25.04.2024 with the ITO, XXXX New Delhi

The assessee could not reply to the notice issued to the assessee u/s 148A (b) of the Act Dt. 19.03.2022 as she could not receive the notice properly on the assessee as required u/s 282(1) of the act and Rule 127 of the Rules 1962.

The first notice issued u/s 148(A)(b) is time barred as per the limitation prescribed in section 149(1)(a) and issue of notice u/s 148A(b) of the act is illegal as per the Hon’ble SC judgement in the case of UOI and others Vs Ashish Aggarwal Dt. 4.5.2022 as the element of income in the entire cash deposit cannot be equal to 50 lakhs or more than 50 Lakhs . If the income is less than 50 Lakhs then section 149(1) (a) is applicable which is time barred in the case of the assessee. Hence the order passed u/s 148(A) (d) of the Act deserves to be cancelled and hence the notice u/s 148 of the Act is illegal.

(b) The approval of PCCIT, New Delhi dated 27.03.2022 was not provided with this order.

The approval obtained by the Ld. JAO obtained from the PCCIT, New Delhi has not been provided to the assessee as explained above and no ref. no. was provided. It is a doubt whether approval obtained or not. Hence the proceedings are not in accordance with law.

(c) The order has been passed with the wrong figure of cash deposited with the XXXXX Bank for a sum of Rs. 1,20,66,500.00 and the same is not in accordance with law.

The complete bank statement is enclosed wherein we find that the total cash deposit with the bank is Rs. 71,32,000.00 not 1,20,66,500.00 as the same has been mentioned in the notice issued to the assessee u/s 148A(b) of the Act and also with the order u/s 148(d) of the Act . Dt. 27.03.2022. The case was opened with the wrong information and with the wrong inputs and hence the reopening is bad.

(d) At the time of passing of the order the Ld. Assessing officer was not having bank statement of the assessee.

The order was passed without having the bank statement which has been obtained by the Ld JAO Dt. 15.02.2023 and the order was passed Dt. 27.03.2022 . This action of the JAO is baseless as this act is purely without application of mind as the Ld JAO has not tried to obtain the copy from the bank before passing the order. Principle of natural justice has been totally denied to the assessee. It is clear that the notice was issued u/s 148A(b) Dt. 19.03.2022 without having tangible material and without making independent enquiries and the order u/s 148A(d) was passed randomly without application of mind . Hence deserves to be cancelled.

(3) The order u/s 147/144 dated 27/03/2023 is also bad in law and deserves to be cancelled due to following reasons:

(a) The order is passed on the basis of borrowed satisfaction, wrong information of cash deposited of Rs. 1,20,66,500.00

As already narrated that the cash deposited with the bank is Rs. 71,32,000.00 not Rs. 1,20,66,500.00 . The entire assessment has been framed on the basis of reopening of assessment on the basis of wrong information from the department as per specific information flagged as per Risk management strategy formulated by the CBDT through ITBA software under the head NMS cases as per the specific information. XXXXXX (PAN: XXXXXX) (CB – 1)has carried out following transactions during the financial year 2015-16 relevant to the assessment year XXXXX: Cash of Rs. 71,32,000.00 was deposited in bank not Rs. 1,20,66,500/- in her bank accounts held with XXXXX Bank.The case has been reopened on the basis of wrong information and hence the assessment framed is bad. Prayed to be made null and void. As held in the Team Global Logistics Pvt.Ltd. Vs DCIT, ITAT Mumbai Dt. 15.10.2024 .

(b)The order is passed without confronting the material available with Assessing Officer.

The order u/s 147/144 has been passed without showing information, providing material to the assessee. No material even Insight report was shown to the assessee and even no bank statement was confronted to the assessee .The order is bad in law as held in DCIT Vs Rashmi Float Glass Ltd. ITAT Kolkata Dt. 12.12.2018

(c) The order is passed in violation of principles of natural justice as enshrined in Constitution of India.

The Principles of Natural Justice are a part of human behaviour. In India, this concept was introduced at an early time. In the case of Mohinder Singh Gillvs. Chief Election Commissioner, the court held that the concept of fairness should be in every action whether it is judicial, quasi-judicial, administrative and or quasi administrative work. The said requirement is completely missing in the above case. Hence the order may be annulled. That the assessment order passed in the case of the assesse is in violation of principal of natural justice. The assessment framed is bad in law and spirits. That even the satisfaction given by the higher authority is bad in law and nullity in the eyes of law on various counts and the same is not sustainable in law. Copy not given to the assessee

(d) The order is passed without appreciating the replies filed by assessee during assessment proceedings.

The assessee filed his reply (CB- 15to25), (CB-27-30)online Dt. 14.03.2023 with the Assessing Officer but the Ld. JAO has not considered the reply of the assessee but did not try to understand the nature of business of the assessee. Section 68 is not applicable in the case of the assessee as the sales consideration in cash (CB-77 to 83) has been deposited with the bank. Ledger A/C of the XXXXXX with our books of accounts and with the books of M/s XXXXXX was submitted on line. Our ledger A/C clearly depicts the payment to the XXXXXX and bills of purchase from the same business entity. No summons was issued to the XXXXXX. On his own the Ld. JAO presumed that the assessee is not having sales and purchase vouchers and hence the entire cash deposited cannot be added u/s 68 of the Act. Section68 is not applicable in the case of the assessee. Every document confirming the purchases from the XXXXXX(CB-84 to 87) is submitted alongwith PAN of the firm withtheir confirmation. Cash Flow Statement is submitted. (CB-76) this cash flow statement has been prepared from the books of Accounts by the assessee maintained on day to day basis.

(e) The order is passed with a predetermined mind set by Ld. Assessing Officer, The Ld. JAO, XXXXX, Delhi has passed the order without application of mind and with a pre determined set as he opened the case on the wrong information , passed the order without making independent enquiries , passed the order with non application of mind , without confronting the material in his possession , without giving proper opportunity to the assessee , without asking any upfront question , presuming on his own that the assessee does not have sales and purchase vouchers . This shows all with a pre- determined set and hence the assessment is bad in law.

(f) The order passed with the presumption that the assessee has not done the retail trading business and book version of the assessee was not accepted and even then made addition u/s 68 of the act which is not in accordance with law as the bank account is not books of the assessee.

The Assessing Officer has relied on the information of the department , has not relied the balance sheet submitted with the AO , never asked for the vouchers and did not summon to the person from whom the goods were purchased i.e. M/s XXXXXX, XXXXXX . Only on the basis of cash deposited with bank and addition to the income considering the entire cash as income of the assessee and applying section 68 of the Act is quite wrong. He has stated in the assessment order at last Para “ Keeping in view of the above facts , it is established that the source of cash deposits of Rs. 71,32,000.00 as sale proceedings of some trading business is nothing but her afterthought and the cash deposits is her unaccounted income” . Therefore the entire cash deposits have remained unexplained credits u/s 68 of the Act and added to the income of the assessee. When he has not accepted the book version of the assessee the application of section 68 is not as per law. When there is cash credits with the books of the assessee and he offers no explanation then section 68 is applicable.

(g) The order is passed by Ld. Assessing Officer without any independent application of mind. It is very well clear that the order has been passed without application of mind. First the denial of book version of the assessee and secondly the addition u/s 68 is clear cut indication that the assessment has been framed without independent application of mind.

(h) The order was passed without discharging the onus which lay heavily on the Assessing Officer.

The order was passed without discharging the onus which lay heavily on Assessing Officer. The assessing officer was duly bound to confront all the relevant material and also information. The Ld. AO made addition without discharging the onus which was very heavily laid on him. Thus, invalidating the entire proceedings. Even he never made any enquiries before making the assessment which he us required to do as per language of section 144 of the Act. He gathered no material and made the assessment purely on guess work which is not permissible under any circumstances and as per law.

(i) The order was passed on whims, conjectures, surmises and suspicion. The order was passed on whims, conjectures, surmises and suspicion. It is also settled law that no addition can be made merely on the basis of surmises and conjectures and even on suspicion. After all, the position of the Assessing Officer is quasi-judicial position and therefore, the finding recorded by the Assessing Officer and fastening of tax liability has to be based on cogent material and evidence, Hon’ble Courts have gone to the extent of holding that suspicion howsoever grave cannot partake the character of any evidence. This has been so held by Hon’ble Supreme Court in the case of Uma Charan Shaw & Bros. Co. vs. CIT reported in 37 ITR 271.

Therefore, in the absence of any cogent evidence against the appellant, the addition could not be made and since made, it is prayed that the same may please be deleted. The order is passed in hurry without giving proper opportunity to the assessee.

(j) Negative burden was placed on assessee which is not possible as per law.

Initially negative burden was put on the assessee by issue of notice u/s 148A (b) dt. 19.03.2022 on the assessee with the wrong information of cash deposited of Rs. 1,15.66,500. And passed the order u/s 148A (d) of the Act Dt. 27.03.2022 and issue of notice u/s 148 of the Act Dt. 27.03.2022 . This is all negative burdens on the assessee.

(K) the assessee has never made the import of goods as narrated by the AO in the assessment order at Para No. 2, Page No. 2 of the assessment order.

The assessee has made no import of goods. This shows the non application of mind by the assessing officer at every front.

(l) The complete bank statement was not seen by the Ld Assessing Officer and he forgot to look the debit entries with the bank which relate to the payment given for the purchase of the goods.

As it was clearly stated in the forgoing Para that the Assessing officer was not having bank statement at the time of issue of notice u/s 148A (b) of the Act, at the time of issue of order u/s 148A (d) of the Act. The reopening was made with having bank statement. In the case of the assessee this bank statement is a crucial document. Only on the information of the department, without application of mind, without independent enquiries the assessment has been framed which shall not stand the test of law.

(4) That having regard to the facts and circumstances of the case, the assessee denies his tax liability at Rs.54,37,877.00 u/s 147 read with Section 144 as his total income is of Rs. 2,30,811.00 as per books of accounts maintained by the assessee and accordingly denies her liability to pay tax and interest demanded thereon.

As very well explained the reopening of the case is not in accordance with law .The assumption of territorial jurisdiction is wrong as assessee was living at XXXXX during the F.Yr. 2021-22 and F.Yr. 2022-23 since her marriage was solemnised. The jurisdiction obtained by the Ld. JAO is wrong as the jurisdiction lies with the Commissioner , XXXXXX .The information relied on by the assesse is incomplete , the assessment framed is bad , the reopening made by no enquiries conducted by Ld. AO and by the Ld.PCCIT , New Delhi. Only on the basis of borrowed belief and satisfaction, the assessment was framed which is without affording ample opportunity to the Assessee, case decided in hurry, the assesse correspondingly denies his liability to pay huge tax, interest as per notice of demand u/s 156 of the Act(CB-26).

(5) That having regard to the facts and circumstances of the case, Ld. AO has erred in law and on facts in assuming jurisdiction u/s 148 which is not in accordance with law and further erred in passing the impugned assessment order. The approval from specified authority could not be provided to the assessee for issue of notice u/s 148 of the Act.

The approval from specified authority could not be provided to the assessee.

The non supply of approval from the specified authority for issue of notice u/s 148A(b) of the Act , issue of order u/s 148A(d) of the Act and issue of notice u/s 148 of the Act is not in accordance with law . No referencenumber has been mentioned for the approval from specified authority in the order passed u/s 148A (d) of the Act dt. 27.03.2022 . The assessee relies on the judgement of the Hon’ble High Court in the case of PCIT Vs Shodiman Investments (Ltd. Reported in 93 taxmann.com 153 (Bom) P). This is against the settled principles of Natural justice as reopening of an assessment is an extraordinary power available to the Ld AO and it should not be done in a cavalier manner. This is why the legislature in its wisdom had put lot of restrictions by imposing conditions for seeking approval and sanction from a superior officer in terms of section 151 of the Act. Hence the said approval obtained from specified authority ought to have been furnished by the Ld. AO for reopening the assessment to the assessee. The act not done in a particular manner makes the proceedings not with the intention of the legislature.

It has been fully narrated that the reopening of the assessment is bad, not in accordance with law and the jurisdiction obtained by the Ld. JAO is bad as the assessee is living at XXXXXX, doing business at XXXXXX. On the basis of wrong information, the case was reopened.

(6) That having regard to the facts and circumstances of the case, in any case and in any view of the matter, action of Ld. AO in assuming jurisdiction and framing the impugned assessment order u/s 147 r.w.s 144 dated 27.03.2023 is bad in law and against the facts and circumstances of the case and is not sustainable on various legal and factual grounds.

The assessment order(CB- 31-35) has been passed without gathering the material, without making independent enquiries as required for making the assessment even u/s 144 or 143(3) of the Act. The Ld Assessing officer relied only on the information of the department but made no independent enquiries before passing the final assessment order Dt. 27.03.2023 which makes the assessment null and void.

The assesse has very well explained in the above grounds of appeal that the reopening in the case of the assesse is illegal as well as the assessment framed is not in accordance with law. No draft assessment order has been issued to the assesse which is required in the case of the assesse. The assessment was framed after issue of show cause notice u/s 142(1) to be complied Dt. 10.03.2023 was issued to the assessee but this notice u/s 142(1) is not a show cause notice.

Principal of natural justice has been totally denied to the assesse.

The Assessee relies on the following judgement in this regard.

Enviro Control Pvt. Ltd. Vs National e assessment centre. In the high court of Gujarat at Ahmadabad. 29.03.2022 wherein it was held.

In the matter on hand, the petitioner has approached this court with an emphasis on clear violation of principles of natural justice and action in total disregard to the provisions of law which makes the order non-Est. statutorily. Emphasizing the requirement of law on the statute after section 144B(CB-11) has been inserted. It is the case of the petitioner that the respondent is obligated to issue Draft Assessment Order before issuance of the final assessment order. In the instant case, in absence of service of any Draft Assessment Order as well as show cause notice, a complete violation of not only principle of natural justice but also of statutory requirement is pleaded.

The assesse has fully replied to the notice issued to the assesse Dt 14.03.2023 but the Ld. AO has not gone and read the reply of the assesse wholeheartedly. Complete balance sheet was submitted with the AO but AO treated it as bogus balance sheet on his own without asking any question.

In the case of the assesse no draft assessment order and show cause notice was sent to the assesse, the assessee could not reply to the show cause notice and he could not got opportunity for video conferencing. He lacks opportunity of being heard. Principle of natural justice has been totally denied to the assesse.

Keeping in view the above it is prayed to make the assessment null and void as the same is without adhering to the principal of natural justice, assessment framed by the Ld. JAO is in a hurried manner, lacks jurisdiction, the impugned assessment order dated 27.03.2023 is illegal, bad in law, void ab-initio and against the facts and circumstances of the case and without following the principles laid down u/s 144B of the Act . The addition made u/s 68 is bad in law as he has not recognised the accounts maintained by the assessee and on the basis of which balance sheet was prepared, he did not accept the sale purchase done by the assessee, did not accept the cash deposit out of the sale proceeds and further payment to the XXXXX, XXXXX. On the one hand ignored the books of accounts and on the other side he is making addition u/s 68 of the Act. Which is not possible by any stretch of imagination .When there is no books of accounts, there cannot be cash credit with the books and there cannot be addition u/s 68 of the Act .The assessee relies on the judgement of the Bombay High Court in the case of CIT Vs. Bhai Chand N Gandhi 141 ITR 67 wherein held that the bank pass book could not be treated as a book of the assessee , and that it was not a book maintained by the assessee for any previous year as referred to in section 68 of the Act . But as assessee has done the business and maintained the complete books and submitted the balance sheet with the JAO, even then he did not accept the credence and authenticity of the business. As such without accepting the books of the assessee, without accepting the true business of the assessee, addition u/s 68 is bad in law

(7) That having regard to the facts and circumstances of the case, Ld. AO has erred in law and on facts in making addition of Rs.71,32,000.00 u/s 68 of the Income Tax Act and that too by recording incorrect facts and findings and without observing the principles of natural justice and by disregarding the submissions ,evidences and material placed on record by the appellant and without providing the adverse material against assessee on record and warranting such addition merely on the basis of surmises and conjectures.

This Ground of Appeal related to section 68 of the Act, has been fully explained at the above ground of appeal from Sr. No. 1 to Sr. No. 6

(8) That having regard to the facts and circumstances of the case, in any case and in any view of the matter, action of Ld. AO in making addition of Rs. 71,32,000.00 u/s 68 is bad in law and against the facts and circumstances of the case.

This Ground of Appeal related to section 68 of the Act, has been fully explained at the above ground of appeal from Sr. No. 1 to Sr. No. 7

Section 68 is not applicable in the case of the assessee as the Ld. JAO has rejected the book version of the assessee. When no books are there in the eyes of the Ld. JAO; no addition is called for u/s 68 of the Act. The addition made for a sum of Rs. 71,32,000.00 is not sustainable in the present circumstances .

(9) That in any case without prejudice to the above grounds, the addition made in the impugned order is beyond jurisdiction and illegal inter alia for the reason that such addition could not have been made since no incriminating material has been provided to assessee either before assessment proceedings or during assessment proceedings warranting impugned addition. The addition made is not sustainable as the same is beyond jurisdiction and illegal. The territorial jurisdiction is not with the AO who reopened the case of the assesse. The mail id is not registered with the ITD as assessee never filed her return due to income below the taxable limit always. As the notices could not be received by the assesse as per section 282(1) and rule 127(1) of the rules 1962, she could not reply properly. No material and concrete information has been provided to the assesse along with the notice us 148A (b) Dt.19.03.2022 . The information is not as per the section 148 Explanation 1 of the Act. What document depicts that assessee has deposited cash of Rs. 1,15,66.500.00 by the assessee in her bank account with XXXXX Bank A/C No. XXXXX which was used by the assessee for her business just like a current bank Account . Here it was required to make enquiries by the Ld JAO which exercise he could not do. There were no enquiries conducted by the AO before making belief that the assessee has deposited cash of Rs. 1,20,66,500 to her bank account out of her undisclosed income and issue of notice u/s 148A(b) of the Act . There is no document so called incriminating material and the same was not provided to the assesse before assessment and during the course of assessment. Hence the assessment framed is bad in law and spirits to be made null and void. Notices were not received by the assessee as per section 282(1) and rule 127(1) of the Income tax rules 1962 and she could not reply properly .The assesse has very well explained in the above grounds of appeal that the reopening in the case of the assesse is illegal as well as the assessment framed is not in accordance with law. No draft assessment order has been issued to the assesse which is required in the case of the assesse. Principal of natural justice has been totally denied to the assesse. The reopening of the assessment and finalisation of the assessment is contrary to the provision of the Act.

(10) That in any case and in any view of the matter, action of Ld. AO in making the impugned addition and passing the impugned assessment order dated 27.03.2023 is illegal, bad in law, void ab-initio and against the facts and circumstances of the case and in gross violation of principle of natural justice. Sufficient opportunity was not provided to the assessee to substantiate her business by submitting sale and purchase evidences.

The assessee lacks opportunity of being heard as no show cause notice was issued to the assessee. No draft assessment order was issued to the assessee as required u/s 144B of the Act. No opportunity of video conferencing was provided to the assessee .Assessee submitted his reply to the notice u/s 142(1) (CB-12 to 14) of the Act Dt. 10.03.2023 .Assessee submitted all these documents online which is summarised as under:

(a) Computation of total income which is non taxable.

(b) Balance sheet and P & L Account

(c) Ledger Account of M/S XXXXXX which shows the payment received from the assessee and goods sold to the assessee.

Ledger of M/S XXXXXX in the books of the assessee .But the Ld Assessing Officer has not asked for the sales and purchase vouchers by putting a question to the assessee, issuing show cause notice and draft assessment order. Reason for unaudited balance sheet was the turnover of the assessee is less than Rs. 1 cr. Before 1.4.2013 it was sixty lakh rupees for getting audit the books of accounts. If payment to the XXXXXX is after thought. If cash deposited out of the sales consideration is after thought on regular basis

First cash was deposited with the bank and then payment was made to M/S the XXXXXX, XXXXX. Is all this after thought. The perspective of the Ld. JAO is weak as he could not make analysis of the business in a prudent manner and avoided what the law requires. Who stopped him to ask for sales ad purchase vouchers? He could have issued one more notice to the assessee and if the assessee had not replied to that notice then he could believe all this after thought. The addition of Rs. 71,32,000.00 is bad in law as it has been fully explained earlier .

(11) That having regard to the facts and circumstances of the case, Ld. AO has erred in law and on facts in charging interest u/s 234A, 234B of the Income Tax Act, 1961.

Chagrining of interest u/s 234 A is bad as the income of the assessee has not exceeded the maximum amount which is not chargeable to income tax. Her total income as per books of account maintained by the assessee is Rs. 2,32.257.00 and the exemption limit for the AY XXXXX was Rs. 2,50,000.00 . He was not required to file her return as per section 139(1)(b) of the Act . Hence interest u/s 234A and B is not imposable on the assessee as the amount of tax in the case of the assessee is Zero and the assessment framed is bad in law and spirit and is liable to be made Null and void as the reopening of the assessment is bad.

(12) That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.

If at the time of hearing any modification, amendment or deletion is required, you are requested to give this liberty to the assessee to do the same and oblige accordingly. Al the grounds are without prejudice to each other.

(13) That having regard to the facts and circumstances of the case, The Ld. AO failed to appreciate the fact that the cash deposited in the bank made by the appellant during the F.Y 2015-16 were out of the sale proceeds of XXXXXX which were purchased from XXXXXX in the presence of complete Balance sheet and ledger account from XXXXXX.

In this regard it is stated that the assessee has maintained the complete books of accounts comprising of ledger , cash book , bank book and vouchers maintained in a systematic manner and on that basis he has prepared her balance sheet . Prepared balance sheet and submitted the same with the Ld JAO who without examining the same treated it as non existing and after thought of the assessee. He has not rejected the books nor accepted the books. Window was closed by the officer on 16.03.2024 by the Ld JAO and thereafter ,assessee could not submitted any reply further and also no notice issued by the Ld AO after closing of the window for e submission . (CB- 88 to 89)

In my written submissions regarding the case where the assessee’s balance sheet was submitted to the assessing officer, but the officer treated it as unreliable or “bad,” the assessee refers to relevant High Court or Supreme Court decisions that deal with the issue of the assessment of financial records, including balance sheets. Below are some important cases that could be helpful to the assessee referring to in such circumstances:

1. K. P. Varghese vs. ITO (1981) 131 ITR 597 (SC)

In this landmark case, the Supreme Court discussed the issue of assessing officers rejecting the documents and accounts submitted by the assessee. The court held that if an assessee submits books of accounts, including balance sheets, the assessing officer is bound to give due weight to them unless there is clear evidence of their being inaccurate or fraudulent. If the officer considers the documents to be incomplete or unreliable, it must be established by concrete evidence that the records are wrong.

2. CIT v. S. Vaidhyanathan (2001) 249 ITR 91 (SC)

This case is important in situations where the assessing officer rejects the balance sheet or financial statements submitted by the assessee. The court held that the mere rejection of the balance sheet without any supporting evidence of misrepresentation or falsification of accounts is not enough for making an adverse judgment. The assessee’s claim regarding the authenticity of documents should be given due consideration, and the onus of proving the inaccuracy lies on the assessing officer.

3. Rajendra Prasad Moody v. CIT (1978) 115 ITR 519 (SC)

In this case, the Supreme Court discussed the principle of “best judgment assessment” where the assessing officer has the discretion to reject the accounts of the assessee. However, it is crucial that the officer provides sound reasons for such rejection. If the balance sheet or financial statements are rejected, the onus lies on the assessing officer to demonstrate why such rejection is justified. The mere doubt cast by the officer on the documents is insufficient if the assessee has submitted them in good faith and with reasonable accuracy.

4. CIT v. Bhogilal L. Mistry (1981) 130 ITR 413 (SC)

This case reinforces the principle that the rejection of the balance sheet or financial statements should be based on sound reasoning. The assessing officer has the power to reject books of accounts if they are found to be unreliable, but this must be based on concrete and reasonable grounds. If the assessee provides a plausible explanation, the assessing officer cannot arbitrarily disregard it.

5. Hukumchand Mill Ltd. v. CIT (1970) 78 ITR 92 (SC)

This case addressed the issue of how the assessing officer must approach financial records, especially when the books of accounts (including balance sheets) are submitted. If the accounts are in accordance with the law and regulations and the assessee can justify the entries made, the assessment should be carried out on the basis of these books unless there is evidence of fraud or manipulation.

6. S. Ramaswamy& Co. v. ITO (2000) 246 ITR 508 (Mad HC)

This judgment from the Madras High Court may be useful for supporting the position that the balance sheet should be examined in the context of the accounting principles applied, and if the assessing officer finds discrepancies, he must offer the assessee an opportunity to explain or rectify those errors before rejecting the accounts outright.

Due Process in Rejection of Balance Sheet: The assessing officer is required to follow due process when rejecting submitted documents, and it is necessary for them to provide substantial reasoning based on evidence. Simple suspicion or doubt without concrete evidence of wrongdoing is insufficient.

Onus of Proving Falsity: If the assessing officer rejects the balance sheet, it is generally considered that the burden of proof rests with the officer to demonstrate the inaccuracy or falsification of the financial records.

Fair Opportunity for the Assessee: If any part of the balance sheet is found to be potentially incorrect, the assessee must be given an opportunity to explain, correct, or justify the discrepancy before any adverse conclusions are made.

No opportunity was given to the assessee but the Ld JAO closed the window for e submission on 16.03.2023 and asked no question about the authenticity of the books and Profit and loss account and balance sheet.

Assessment Based on Best Judgment: If the books are rejected, the officer must base the assessment on a reasonable “best judgment” standard, rather than arbitrary decisions.

This shows the assessing officer’s treatment of the balance sheet as “bad” and it should be backed by proper evidence, and that the assessee’s version of events, along with the books of accounts, must be given due weight

(14) That having regard to the facts and circumstances of the case, the determination of deemed total income u/s 115JC is not in accordance with law and thereby interest determined to a sum of Rs.35,43,089.00 is huge and illegal u/s 234A & 234B of this act considering it as special income in the presence of complete financials of the assessee to the relevant year.

Section 115JC of the Income Tax Act, 1961, deals with the “Minimum Alternate Tax (MAT)” on companies. Specifically, this section provides the framework for the computation and levy of MAT on the “deemed total income” of a company, which is different from the normal income computed under regular provisions. Assessee is an individual and not a company. Deemed total income determined by the Ld JAO at Page No. 2 col. No. 18 for a sum of Rs. 71,32,000.00 is bad . Tax imposed for a sum of Rs. 18,39,600.00 on special income is bad and imposition of interest amount of Rs. 35,43,089.00 is also bad as the total income of the assessee as per computation chart is Rs. 2.30,810.00 submitted with the Ld JAO dt 14.3.2023 . The imposition of tax and interest is bad in law as per the submissions submitted.

(15) That having regard to the facts and circumstances of the case, the determination of huge tax liability of Rs.54,37,877/- is bad in law when business turnover of the assessee is 61,78,733/-The AO has failed to apply to even presumptive taxation as the entire cash relates to business turnover of the assessee, not income from other sources not disclosed to the department as alleged by the AO in the assessment order.

In this scenario, it seems that the Assessing Officer (AO) has not accepted the financials of the assessee and if it is so he had to go for calculation of income of the assessee under presumptive taxation under Section 44AD of the Income Tax Act, 1961. Here’s a detailed analysis and response to this issue, including legal provisions, court rulings, and written submissions.

1. Provisions of Section 44AD:

Section 44AD of the Income Tax Act, 1961 provides for the presumptive taxation scheme for small businesses. Under this section, eligible taxpayers can declare income at a presumptive rate without maintaining detailed books of accounts.

Conditions under Section 44AD:

• The taxpayer must be a resident individual, Hindu Undivided Family (HUF), or a proprietor of a business.
• The business must be a business referred to in section 44AD, which generally includes businesses engaged in the business of plying, hiring, or leasing goods carriages or any other business (except professions like those under sections 44AA(1)) if the total turnover or gross receipts do not exceed ₹ 1 crores wef 1.4.2013
• The presumptive income under section 44AD is calculated at 8% of the gross receipts or turnover (6% in case of receipts through digital means).

2. Relevance of Financials:

While the AO is not bound by the financials submitted by the assessee, the fact that the assessee has submitted a balance sheet and P&L account should not automatically disqualify the possibility of presumptive taxation under Section 44AD.

Under Section 44AD, the taxpayer is not required to maintain detailed books of accounts or get them audited if they opt for the presumptive taxation scheme. Therefore, the submission of financials, especially when they may be incomplete or non-compliant, should not preclude the AO from considering the application of this section.

The section gives the taxpayer the option to declare income as per the prescribed rates. It does not compel the taxpayer to submit a detailed financial statement if they are opting for presumptive taxation.

3. Power of the AO to Apply Section 44AD:

The AO has the discretion to apply Section 44A0, especially if the assessee is eligible for the scheme and the conditions are met. If the assessee does not maintain proper books of accounts, the AO can invoke Section 44A0 as an alternative method of assessing income.

However, there are limitations:

• If the assessee’s income is not in line with the presumptive scheme (i.e., if the business is not covered under Section 44A0), the AO can reject the presumptive taxation scheme. In the case of the assessee the retail trading business of the assessee is sale and purchase of XXXXXX. Payment to XXXXXX depicts that the assessee has definitely did the business which is small.
• But if the assessee’s business is eligible and the conditions of turnover are met, the AO can apply Section 44A0, even if the financial statements are not accepted.

4. Relevant Court Judgments:

Several court rulings have reinforced the concept of presumptive taxation and the power of the

AO in this regard:

a) CIT vs. M/s. Bharati Shipyard Ltd. (Bombay High Court, 2017):

In this case, the Bombay High Court held that the presumptive taxation scheme under Section 44A0 can be applied if the assessee satisfies the conditions laid down under the section. The court confirmed that the absence of detailed financial records should not automatically disqualify a taxpayer from opting for presumptive taxation.

b) Rajesh Jain vs. DCIT (ITAT Mumbai, 2017):

The ITAT held that the income under Section 44AD should be computed based on the gross receipts or turnover. If the assessee’s turnover is below ₹2 crores and the business is not a profession, then Section 44A0 applies, regardless of whether detailed financials are available.

c) CIT vs. Shree Cements Ltd. (Rajasthan High Court, 2016):

In this case, the Rajasthan High Court observed that the application of Section 44AD is not dependent on the correctness of the submitted financials if the assessee qualifies under the scheme and opts for the presumptive taxation.

d) CIT vs. Orissa Corporation Pvt. Ltd. (Supreme Court, 1986):

The Supreme Court in this judgment emphasized that the AO can apply the provisions of the Income Tax Act, even if the books of accounts are not maintained or are rejected, provided the taxpayer is eligible for the presumptive taxation scheme.

5.Written Submissions:

The written submission for this matter, it is important to emphasize the following points:

1. Eligibility for Section 44AD: The assessee is a resident individual/HUF, and the business is not a profession under Section 44AA (1). The turnover is below ₹1 crores and the conditions for presumptive taxation under Section 44AD is satisfied.

2. No Requirement for Detailed Financials: The assessee is not required to maintain detailed books of accounts or submit a balance sheet and P&L account if opting for the presumptive taxation scheme under Section 44AD, as per the provisions of the Income Tax Act.

3. Discretion of the AO: The AO has the discretion to apply the provisions of Section 44AD. Even if
the submitted financials are not accepted, if the conditions under Section 44AD are met, the AO can apply the presumptive taxation method.

4. Principle of Fairness and Equity: The scheme under Section 44AD is designed to reduce compliance burdens for small businesses, and it should be applied fairly to eligible taxpayers, even if their books of accounts are not maintained in a manner fully compliant with the traditional provisions.

5. Conclusion:

Based on the legal provisions, the AO does have the authority to apply Section 44AD on his own, provided the conditions of the scheme are met. The non-acceptance of the financials should not automatically disqualify the assessee from opting for the presumptive taxation scheme under Section 44AD.

Despite all this the Ld. JAO treated the entire sales as income of the assessee and failed to apply even presumptive taxation.

(16) In the facts and circumstances of the case the Ld. AO is not justified in issue of notice u/s 274 r.w.s 271(1)(c) of the Act as the assessee has not concealed the income .

As the Ld Assessing Officer has made the entire assessment on the basis of presumptions .Generally , under section 271(1)( c ) of the Income Tax Act , 1961 penalties are levied if the tax payer has either concealed income or furnished inaccurate particulars of Income . However, if the addition made to the total income is based on assumptions or estimates, and there is no concrete evidence of deliberate concealment or misrepresentation, it is argued that the penalty should not be imposed.

(17) No approval u/s 151 was ever supplied to the assessee from the specified authority and the same seems to be not in accordance with law before issue of notice u/s 148A (b) dt.19.03.2022, passing the order u/s 148A (d) Dt. 27.3.2022 and issue of notice u/s 148 of the Act Dt. 27.03.2022

Under section 151 of the Income Tax Act, an assessing officer is required to obtain approval from a specified authority before initiating certain proceedings like reopening an assessment under section 147. If such approval is not obtained, the proceedings can be invalid.

The Ld JAO has issued the notice u/s 148A(b) of the Act Dt. 19.03.2022 but not provided copy of approval from the specified authority PCCIT , Delhi Dt. 19.03.2022 vide Ref. No. 100000029558833 .

The Ld JAO passed the order u/s 148A(d) of the Act Dt. 27.03.22 but has not given a copy of the approval obtained from the specified authority and also he has not mentioned in the order at last the Ref No. of the approval .

The Ld. JAO issued the notice u/s 148 of the Act but has not provided the approval from the specified authority who is PCCIT, Delhi. Approval obtained vides Ref NO. 100000029558833 which is same as per notice issued u/s 148A (b) of the Act Dt. 19.03.2022. The assessee relies on the following judgements

1. CIT v. Asha Rice Mills (P) Ltd. (2017) 394 ITR 385 (SC): The Supreme Court ruled that if an assessing officer fails to obtain prior approval as required under section 151, the reopening of the assessment under section 147 is invalid. In this case, the court emphasized that the mandatory approval is a condition precedent for the validity of reopening the assessment.

2. GKN Driveshafts (India) Ltd. v. ITO (2002) 125 Taxman 27 (SC): The SC in this case reiterated that the approval must be obtained before initiating the assessment proceedings. The failure to obtain prior approval as mandated under section 151 makes the reopening of the assessment illegal.

3. ITO v. Dharampal Premchand (1999) 70 ITD 387 (Delhi): The ITAT held that the assessing officer’s
failure to obtain approval under section 151 for reopening the assessment would result in the assessment being void. The case clarified that the obtaining of approval from the specified authority is a statutory requirement.

4. M/s. Visteon Automotive Systems (India) Ltd. v. ACIT (2013) 41 com 451 (ITAT Delhi): The ITAT held that reopening of assessment without obtaining prior approval from the specified authority is not valid. The court observed that such approval is mandatory under the law.

5. Hindustan Lever Ltd. v. R.B. Wadkar (2004) 267 ITR 338 (Bombay HC): In this case, the Bombay High Court held that the failure of the assessing officer to take prior approval under section 151 results in the invalidation of any assessment proceeding initiated.

But the AO has not supplied the copy of approval from the specified authority to the assessee

If the Assessing Officer (AO) has not provided the copy of the approval obtained from the specified authority under Section 151 of the Income Tax Act to the assessee, it may raise issues regarding the transparency and validity of the reassessment proceedings. Section 151 mandates that the approval of a specified authority (e.g.PCCIT, Delhi) must be obtained before initiating proceedings under Section 147. If this approval is not provided to the assessee, it could potentially make the reassessment procedure unlawful.

The assessee relies on the following judgements where the AO failed to provide the necessary documents, including the approval, to the assessee:

1. K.L. Mehra v. ACIT (Delhi High Court, 2002) 258 ITR 678

• The Delhi High Court held that the assessee is entitled to receive a copy of the approval obtained under Section 151 of the Income Tax Act for the reassessment proceedings. The court observed that failure to provide such documents can lead to a violation of the principles of natural justice.
• Conclusion: The High Court ruled that the absence of a copy of the approval could render the reassessment void, as the assessee has the right to know the basis for initiating such proceedings.

2. CIT v. S. Sunder (2009) 180 Taxman 133 (Madras High Court)

• The Madras High Court held that the failure to provide the approval of the specified authority under Section 151 to the assessee could be a violation of the right to fair procedure. The court observed that the lack of this document affects the transparency of the reassessment process.
• Conclusion: In this case, the court concluded that reassessment could be invalid if the approval is not provided to the assessee, as it would not be able to challenge the approval in case of any irregularity.

3. Sunita Devi v. CIT (2006) 287 ITR 271 (Patna High Court)

• This case also dealt with a situation where the assessee did not receive a copy of the approval from the specified authority under Section 151. The Patna High Court emphasized that such non­disclosure of approval is a serious matter, especially since it directly impacts the legality of the reassessment.
• Conclusion: The court ruled that the failure to supply the copy of the approval to the assessee can invalidate the reassessment proceedings, as the assessee must be given an opportunity to challenge the approval.

4. ITAT rulings on this issue

• Gurdeep Singh Suri v. ACIT (ITAT Delhi, 2013):

The ITAT noted that where the Assessing Officer fails to provide the copy of the approval to the assessee, the proceedings under Section 147 may be deemed invalid. The failure to disclose the approval affects the fairness of the assessment process.

Conclusion: The ITAT ruled that non-supply of the copy of the approval obtained under Section 151 can lead to the annulment of the reassessment.

5. CIT v. Usha International Ltd. (Delhi High Court, 2012) 342 ITR 598

• The Delhi High Court held that the absence of the approval of the specified authority under Section 151, or failure to provide it to the assessee, is a procedural lapse. This can render the reassessment invalid. The High Court stressed that such approval is crucial for the validity of the reassessment proceedings.
• Conclusion: The court emphasized that non-supply of the approval to the assessee violates the

principles of transparency and fairness in tax assessments.

Legal Implications:

• Violation of Natural Justice: Failure to provide the copy of the approval from the specified authority can be considered a violation of natural justice. The assessee is entitled to know the approval details to assess whether the reassessment is valid.

In the case of the assessee in hand the copy of approval could not be provided to the assessee neither before assessment , nor during the assessment proceedings and also after assessment when specifically assessee applied for the same Dt. 25.04.2024 at point no. 4

• Right to Challenge: Without the copy of the approval, the assessee may not be in a position to challenge the reassessment, which could lead to the proceedings being declared invalid.
• Effect on Validity of Reassessment: If the specified authority’s approval is not shared with the assessee, it can be argued that the entire reassessment process is flawed and may be annulled by the courts or tribunals.

1. It is stated that the reassessment is invalid due to non-compliance with the procedural requirements.

(18) That the assessee has not received the notices in person, speed post, mail and on ITD portal. In the absence of proper service of notice the assessment framed is bad in law and spirits. All notices were issued and served at the wrong address of the assessee as the assessee was living at XXXXX.

In this regard it is stated that the initial notice issued u/s 148A (b) was not issued in accordance with section 282(1) of the Act and Rule 127(1) of the Rules 1962. This notice bring the AO to reopen the assessment. This is the initial notice after amendment to the provision w.e.f1.4.2021. This not was not received by the assessee at her XXXXXX address. The AO was not having bank statement(CB-55 to 58) with him till the date this notice was issued so he could not notice the exact address and current address of the assessee.

Service of Notice Under Section 148A (b) and section 282(1) of the Act .

In many cases, courts have observed that for a notice to be valid, it must be issued and served in accordance with the provisions of the Act and Rules. Improper service can render the notice invalid. For instance, in CIT v. Bhanji Lavji (1961) 41 ITR 680 (SC), the Supreme Court held that the provisions relating to the service of notice must be strictly complied with.

• Section 282(1): Service of notice, order, or any other communication should be done by delivering the notice directly to the assessee or to their authorized representative. It must also be in writing and should be made within the prescribed period.

Hence the notice was not validly issued, and as such, the assessment proceedings are invalid.

2. Judicial Precedents on Improper Service

• Gyan Chand v. CIT (2016): In this case, the Delhi High Court held that where the service of notice is not in compliance with the provisions of the Act and Rules, the entire assessment proceedings could be quashed.
• J. Joseph v. ITO (1995): The Kerala High Court emphasized that a notice under Section 148 is a jurisdictional notice, and its proper service is essential for the valid initiation of reassessment proceedings.
• Sandeep Gupta vs. ITO (2020): The Delhi High Court held that non-issuance of notice in the proper form or within the prescribed time could invalidate the re-assessment proceeding, emphasizing the need for strict adherence to procedure.

3. Section 282(1) and Rule 127(1):

Section 282(1) lays down the conditions for service of notices and orders. It states that the notice must be given by:

• Hand delivery,
• Post, or
• Through any other means as prescribed under the rules.

Further, Rule 127(1) specifies the manner of service of notices under the Income Tax Act. These include:

• Delivery by hand to the person concerned,
• Service by registered post, and
• If the person is unavailable, the notice can be left at the person’s last known address.

If these procedures are not followed, it could lead to the invalidity of the notice and the subsequent proceedings.

4. Consequences of Improper Service:

• Nullification of Proceedings: If the notice is not served in the prescribed manner, the reassessment or re-opening proceedings may be declared invalid. The courts have consistently held that any procedural lapse, including improper service of notice, affects the jurisdiction of the tax authority to initiate the assessment proceedings.
• Re-opening Cannot Be Initiated Without Valid Notice: As per judicial precedents, reassessment proceedings under Section 147 cannot be initiated unless a proper notice is served as per the requirements of Section 282 and Rule 127.

Conclusion:

The failure to issue a proper notice under Section 148A (b) as required under Section 282(1) and Rule 127(1) can lead to the invalidation of the entire assessment or reassessment proceedings. In the case of the assessee the first notice u/s 148(A)(b) could not be delivered properly at his last known address which isXXXXX . Non service of notice in a proper manner shall invalidate the entire proceedings.

(19) Mere cash deposited in the bank account would not disclose escapement of income as it is a cardinal principal that the entire receipts are not income and every income is not taxable income of the assessee.

The assesse has deposited cash with his saving bank which is joint with her husband Mr. XXXXX used as a current account for a sum of Rs. 71,32,000.00 during the F.Yr. 2015-16. In this regard every source of cash deposited with the saving bank account is explained. The reopening of the assessment only on the basis of cash deposited by the assesse in his saving bank account is not in accordance with law. In the absence of return and only on the basis of cash deposited by the assesse with his saving bank account the reopening is bad in law.

The assessee relies on the following judgements in this regard. The Ld. Assessing Officer has made no application of mind at the time of issue of notice u/s 148A (b) Dt. 19.03.2022 and sent to the PCCIT, New Delhi for approval who in turn has also not applied his mind. The assessee has relied on the judgment in the case of Harmeet Singh, Delhi Vs. ITO, New Delhi ITA No. 1939/Del/2016 A.Yr. 2008-09 where in stated that the reopening the assessment purely on the ground that the cash deposited with the bank is income of the assessee is purely a doubt that it is income of the assessee not a confirmed finding, not any tangible evidence with the ITO to form the opinion that the income of the assessee has escaped assessment. The reopening is bad enough. In the absence of any tangible material, in the case of the assessee in hand thereopening and issue of the notice u/s 148 is bad and hence prayed to make the entire assessment null and void. When the assessment proceedings u/s 147 are initiated on the fallacious assumption that the bank deposits constituted undisclosed income, over-looking the fact that the source of the deposits need not necessarily be the income of the assessee. The proceeding is neither countenanced, nor sustainable in law as held in ITAT, Amritsar Bench in case of Amrik Singh vs. ITO 159/ITD 329 (Amritsar) .Information do not disclose escapement of income and that mere cash deposit in bank account is not sufficient to presume that it is a case of escapement of income. There is other judgement which goes in favour of the assessee.

Income Tax Appellate Tribunal – Delhi

Shri Mahavir Prasad, Haryana vs Ito, Rewari on 9 October,2017

“The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof;”

The assesse was not given ample opportunity to present the relevant papers in this regard. The Ld CIT (A) is prayed to accept the relevant papers in this regard so that the source of cash deposited is justified in the interest of substantial justice. The assesse relies on the following judgement.

Baba Kishan Dass Education and Charitable Society Vs ITO, Exemptions ,ITAT , Chandigarh Dt. 15.01.2024 wherein held

“Therefore, in interest of substantial justice, we hereby admit the additional evidence and the matter is remanded to the file of the Ld.CIT (A) to examine the matter a fresh after providing reasonable opportunity to the assessee.”

Cardinal Principle:

1. Presumption of Innocence: The fundamental principle of tax law is that mere deposits or transactions, including those involving large sums of cash, do not automatically lead to a presumption that income has been concealed or has escaped assessment. The onus is on the assessing authorities to prove that the deposits represent unreported income or income that has been hidden.

2. Burden of Proof: The burden of proving that income has escaped assessment lies with the department. The mere act of depositing money does not shift this burden onto the assessee. There must be a clear and substantiated link between the deposits and the alleged income.

3. Legal Standard: Tax authorities must have evidence that the deposited cash represents income that has not been disclosed. Without concrete evidence, it is unjust to assume that the deposits reflect unreported income.

The relies on the following judgement too

1. K. P. Varghese v. ITO (1981) 131 ITR 597 (SC): The Supreme Court held that the mere fact that there has been a deposit of cash in a bank account does not lead to the presumption that the cash is unaccounted income. It is necessary to establish, with clear evidence, that the cash deposited represents income that has escaped assessment.

2. CIT v. P. Mohanakala (2007) 291 ITR 278 (SC): The Supreme Court observed that the mere failure of an assessee to explain the source of a cash deposit does not automatically lead to the conclusion that the money deposited represents undisclosed income. The court emphasized the necessity of examining the circumstances surrounding the deposit and considering other relevant factors.

3. CIT v. Daulat Ram Rawat Mull (1973) 87 ITR 349 (SC): The court held that mere deposit of money in a bank account by itself is not sufficient to establish that the amount represents income from undisclosed sources. The assessing officer must look into the source of the deposit and other facts, and must also allow the assessee an opportunity to explain the source.

4. CIT v. Durga Prasad More (1971) 82 ITR 540 (SC): The Supreme Court ruled that the explanation of the source of money deposited by the assessee should be considered in context. If the assessee offers a reasonable explanation and provides evidence supporting the source of the deposit, it is improper for the authorities to treat the deposit as income escaping assessment.

5. Shiv Lal (HUF) v. CIT (2001) 251 ITR 320 (Del): The Delhi High Court held that the mere deposit of cash in a bank account does not automatically lead to the conclusion that the assessee has concealed income. The assessing officer must prove that the deposits represent income from undisclosed sources.

• No Presumption of Undisclosed Income: A bank deposit is not presumed to be undisclosed income until proper evidence is provided. Even large deposits can be explained as loans, gifts, or other legitimate sources of income.

1. The court judgments cited reinforce the principle that the burden of proof lies on the tax authorities to prove that the deposited amounts represent income that has escaped assessment.

2. The assessee is entitled to provide explanations and evidence regarding the source of the cash deposits, and the authorities must consider these before drawing any conclusions.

By focusing on these points and the supporting case law, the submission can effectively argue against the presumption that cash deposits automatically represent escaped income.

(20) The complete balance sheet, Profit & loss account were duly acknowledged by the AO in his assessment order but the book version of the assessee was completely rejected. The addition u/s 68 of the Act is not justified when complete books were rejected by the AO as bank deposits are not cash credits with the books of the assessee and bank account is not books of the assessee.

The addition made u/s 68 is bad in law as the Ld. JAO, XXXXX , New Delhi he has not recognised the accounts maintained by the assessee and on the basis of which balance sheet was prepared , he did not accept the sale purchase done by the assessee , did not accept the cash deposit out of the sale proceeds and further payment to the M/s XXXXXX . On the one hand ignored the books of accounts and on the other side he is making addition u/s 68 of the Act. Which is not possible by any stretch of imagination .When there is no books of accounts, there cannot be cash credit with the books and there cannot be addition u/s 68 of the Act . The assessee relies on the judgement of the Bombay High Court in the case of CIT Vs. Bhai Chand N Gandhi 141 ITR 67 wherein held that the bank pass book could not be treated as a book of the assessee, and that it was not a book maintained by the assessee for any previous year as referred to in section 68 of the Act. But as assessee has done the business and maintained the complete books and submitted the balance sheet with the Ld.JAO, even then he did not accept the credence and authenticity of the business. As such without accepting the books of the assessee, without acceptingthe true business of the assessee, addition u/s 68 is bad in law. The business was not accepted by the AO for want of sales and purchase vouchers. Without putting any question regarding the same it is only presumption of the AO that assessee has not done the business.

In situations where the Assessing Officer (AO) rejects the books of accounts based on the presumption that the taxpayer has not done business due to non-production of sales and purchase vouchers, without explicitly raising any questions or seeking clarifications regarding the same, there are several relevant judgments that can be cited to challenge such an action. Courts generally emphasize that the AO’s actions must be based on concrete evidence or clear discrepancies, rather than mere assumptions. Here are some key case law references:

1. CIT v. M/s. Kamdhenu Steel & Alloys Ltd. (2011) 338 ITR 197 (Delhi High Court)

A) Issue: The AO had rejected the books of account and made an assessment based on assumptions that the taxpayer had not carried out business, primarily because the taxpayer failed to produce certain documents, including purchase and sale bills.

Ruling: The court emphasized that the mere non-production of certain documents, in this case, sales and purchase vouchers, does not lead to a presumption that no business was carried out. It was held that the AO should have made efforts to verify the business activities and should not have rejected the accounts without tangible evidence.

Relevant point: The Court held that rejection of books of accounts should be based on facts and evidence, not mere assumptions. The AO needs to specify reasons for rejecting the documents.

2. CIT v. Calcutta Discount Co. Ltd. (1961) 41 ITR 191 (SC)

Issue: The Assessing Officer assumed that the assessee was not conducting any business activity despite the taxpayer claiming it was in business. The AO had rejected the accounts on suspicion and non-production of certain documents.

Ruling: The Supreme Court held that rejection of the books of account must be done on the basis of proper reasoning and evidence. Mere suspicion is not sufficient for rejecting the accounts of an assessee.

Relevant point: The Court held that an Assessing Officer must be careful when rejecting the books of account, and rejection based on assumptions or suspicion without evidence is not justified.

3. CIT v. B.M. Agarwalla (2001) 251 ITR 443 (Calcutta High Court)

Issue: The taxpayer had not produced certain supporting vouchers for sales and purchases. The Assessing Officer rejected the books of account and made an assessment based on estimates.

Ruling: The court noted that the mere non-production of documents like sales and purchase vouchers is not sufficient to reject the books. The taxpayer must be given an opportunity to explain discrepancies, and the AO cannot assume that the business was not conducted without any substantive evidence.

Relevant point: The court reinforced that the AO must specifically point out discrepancies and questions the taxpayer. Presuming a lack of business activity without evidence is not justified.

4. Rajendra Prasad Agarwal v. CIT (2008) 214 CTR 305 (XXXXX High Court)

Issue: In this case, the taxpayer’s books were rejected for not providing sufficient documentary evidence, such as sales and purchase vouchers. The AO made an assessment based on estimations.

Ruling: The court held that rejection of books of account can only be done if the AO points out discrepancies and asks the taxpayer to explain them. The mere failure to produce documents does not automatically imply that the business was not carried out.

Relevant point: Rejection of books must be substantiated by concrete evidence, and the AO is obligated to ask the taxpayer for clarification on any document or discrepancy before making presumptions.

5. CIT v. S. K. Gupta & Co. (1999) 239 ITR 512 (Delhi High Court)

Issue: The taxpayer had failed to produce all supporting documents, including purchase and sale vouchers. The AO rejected the books and made an assessment based on estimates. Ruling: The court held that before rejecting the books of account, the AO should give the taxpayer an opportunity to explain the discrepancies. Furthermore, the AO cannot reject the books merely because certain documents are missing without proving that the taxpayer has failed to conduct business.

Relevant point: The court emphasized the importance of natural justice, where the taxpayer must be given a chance to explain the situation before rejection.

Presumption vs. Evidence: Courts generally disapprove of the AO rejecting the books based on mere presumption. The rejection must be based on specific discrepancies or tangible evidence of wrongdoing.

Opportunity to Explain: The AO is expected to raise specific queries regarding missing documents and give the taxpayer an opportunity to explain before rejecting the books. Estimation of Income: If the books are rejected, the AO may resort to estimation, but it must be based on sound reasoning and not arbitrary assumptions.

It is now clear that the AO’s actions were based on presumptions and that the rejection of books without specific queries or evidence is not legally justified.

(21). That having regard to the facts and circumstances of the case. All evidences collected behind back of assessee used for forming opinion against the assessee must be confronted to assessee. Only information is not sufficient.

The assessee was sent notice u/s 148A(b) of the Act Dt. 19.03.2022 which contained only information of cash deposit of Rs. 1.15.66.500 in the bank account of the assessee . Theinformation is wrong. No evidence was provided to the assessee from where this information has been gathered by the AO. No insight portal details were provided. No bank statement was provided. No AIR report of the department. No CIB Report showing cash deposited by the assessee;enquiry letter was provided to the assessee. Sufficient material was not provided to the assessee at the time of issue of notice u/s 148A (b), at the time of issue of order u/s 148A (d) of the Act and during the course of assessment proceedings. It was obtained by the assessee when he applied for the same to the AO dt. 25.4.2024 (CB-59 to 62)

When the Assessing Officer (AO) uses evidence collected behind the back of the assessee (i.e., without providing an opportunity for the assessee to be aware of or confront the evidence) to form an opinion against the assessee, such a procedure is considered a violation of the principles of natural justice. It is crucial that the assessee be given the opportunity to respond to the evidence that the AO relies upon. Mere information or the collection of evidence in secret is not sufficient, as the assessee has a fundamental right to confront and challenge the evidence used against them.

1. Kailashben Manharlal Chokshi vs. CIT (2013) 350 ITR 4 (Guj.):

In this case, the Gujarat High Court emphasized that the opportunity to rebut evidence used by the AO should be given to the assessee. It was held that if any material, which is adverse to the assessee, has been used by the AO, it must be confronted to the assessee to provide them an opportunity to explain or challenge it.

2. I. D. M. S. Ltd. vs. CIT (1966) 59 ITR 18 (SC):

The Supreme Court ruled that when an adverse inference is drawn by the AO, the assessee must be given an opportunity to explain the material that is used to form such an inference. The Court stressed that natural justice demands fairness in procedure, and that includes confronting the assessee with the evidence collected.

3. Rajesh Kumar & Ors. vs. DCIT (2006) 287 ITR 91 (SC):

In this case, the Supreme Court clarified that principles of natural justice are fundamental to the fairness of any administrative procedure, including tax assessments. If the AO relies on any material or information collected behind the assessee’s back, such material must be disclosed and given to the assessee to provide an opportunity for rebuttal.

4. Union of India vs. Tulsiram Patel (1985) 3 SCC 398 (SC):

Although not directly related to income tax, this case highlights the importance of fairness and natural justice in administrative proceedings. It held that if an adverse decision is made based on information that was not disclosed to the party, it violates the basic principles of natural justice.

• In the case of the assessee the AO has relied upon information or evidence that was neither shared with the assessee nor confronted to them before forming an opinion. This is a violation of the principle of natural justice.
• Argument: It should be stated that the AO has breached the legal requirement to give the assessee a chance to be heard and to respond to the evidence that is being used against them. The assessee should have been provided with all the material collected by the AO to formulate a proper response.
• The assessee prays for the annulment or reconsideration of the assessment based on this violation of natural justice and the non-confrontation of evidence.

Ground of Appeal No. 1:

The AO has relied upon evidence collected behind the back of the assessee to form an opinion and make an adverse assessment without confronting the same to the assessee.

Submission:

1. It is submitted that the AO has based his opinion and conclusion on evidence collected without giving the assessee an opportunity to know or confront the said evidence. The right to be confronted with all material evidence used against the assessee is a fundamental principle of natural justice.

2. In this regard, the assessee relies on the judgment in Kailashben Manharlal Chokshi vs. CIT (2013)
350 ITR 4 (Guj.), wherein it was held that it is necessary for the AO to confront the assessee with all adverse material before forming an opinion against the assessee.

3. Further, as per Rajesh Kumar & Ors. vs. DCIT (2006) 287 ITR 91 (SC), the AO is mandated to provide an opportunity to the assessee to explain or rebut any material evidence collected during the assessment proceedings, failing which the assessment will be deemed to be in violation of principles of natural justice.

4. It is therefore prayed that the assessment order be annulled or remanded back to the AO with directions to issue a fresh order after providing the assessee with all the evidence used against them.

5. Prayer:

In view of the above submissions, it is prayed that the assessment be quashed or alternatively, the matter be remitted back to the AO for reconsideration after providing the assessee with all the evidence used in the assessment.

(22). That having regard to the facts and circumstances of the case, It is very much clear that AO was not having bank statement at the time of issue of notice u/s 140A(b) and during the course of proceedings u/s 148A(d) as the same was called by issue of notice u/s 133(6) Dt. 15.02.2023 which clearly indicates no enquiries were conducted before issue of notice u/s 148(A)(b) and as such the reopening u/s 147 is bad.

This ground has already been explained in the aforesaid paragraphs .The Ld Assessing Officer was not having bank statement with him at the time of issue of notice u/s 148(A) (b) of the Act, Dt. 19.03.2022 . It has been called by issue of notice u/s 133(6) (CB-63 to 64)of the Act dt. 15,02,2023 . This clearly indicates that the Ld JAO was not having bank statement at the time of passing of order u/s 148(A)(d) of the Act . Dt. 27.03.2022. The notice issued u/s 148A (b) is bad in law without making independent enquiries. Hence the entire assessment is prayed to be made null and void.

(23). That having regard to the facts and circumstances of the case, the issue of notice u/s 148 is bad and not in accordance with law and never served on the assessee well in time.

Section 148 (CB-5)of the Income Tax Act, 1961, allows the tax authorities to issue a notice for the reassessment of income if they have reason to believe that a person has underreported their income. However, the notice issued under Section 148 must meet certain conditions to be valid, such as being based on correct information and issued within the prescribed time limits.

If the notice under Section 148 is issued on incorrect information, or if the proper procedure is not followed, it could be considered invalid. Below are some key points and court judgments that may help clarifying the validity of a notice under Section 148 in case of incorrect information:

1. Validity of Notice Issued Under Section 148:

The notice issued under Section 148 must be based on “reason to believe” that income has escaped assessment. If the basis for the notice is found to be incorrect or flawed, the notice may be challenged as invalid.

2. Important Court Judgments:

• GKN Driveshafts (India) Ltd. v. Income Tax Officer (2003) 259 ITR 19 (SC): The Supreme Court held that if the assessee challenges the notice issued under Section 148, the first step is to file an objection with the Assessing Officer. If the objection is not resolved, the assessee may approach the High Court. The judgment emphasized that the Assessing Officer must provide the reasons for issuing the notice when requested.
• Kelvinator of India Ltd. v. Income Tax Officer (2010) 320 ITR 561 (SC): The Supreme Court ruled that for a valid reassessment notice to be issued under Section 148, there must be a “reason to believe” that income has escaped assessment. This “reason to believe” should be based on genuine facts, and it is not enough to rely on vague or incorrect information.
• XXXXX and Eastern Newspaper Society v. CIT (1979) 119 ITR 996 (SC): The Court held that the Assessing Officer must have material or facts to justify the belief that income has escaped assessment. If the information used to issue the notice is incorrect or irrelevant, the notice can be quashed.
• CIT v. Onkar S. Mehta (2009) 318 ITR 194 (Bombay HC): The Bombay High Court held that if a notice under Section 148 is issued based on information or facts that are incorrect or based on assumptions without material evidence, the notice can be invalidated.
• Phool Chand Bajrang Lal v. ITO (1993) 203 ITR 456 (SC): The Supreme Court held that the reopening of an assessment based on incorrect information or failure to disclose material facts can render the notice invalid. The Court emphasized that if there was no proper reason to believe that income had escaped assessment, the reopening would not be valid.

3. Grounds for Invalidity:

A notice under Section 148 can be considered invalid if:

• It is issued on the basis of incorrect or vague information.
• The Assessing Officer does not have any “reason to believe” that income has escaped assessment.
• The notice is issued after the prescribed time limit.
• There is a lack of proper disclosure or justification for reopening the assessment.

Conclusion:

Here are some relevant court judgments that discuss the issue of invalidity of notices under Section 148 due to wrong or incorrect information, especially considering amendments in the law:

1. Amendment in the Law (2021) –

• The Finance Act, 2021 introduced significant amendments to Section 148 of the Income Tax Act. Prior to the amendment, the procedure for issuing notices under Section 148 was relatively less stringent, and the Assessing Officer had more discretion.
• The amendment, however, introduced the requirement for prior approval from a higher authority (such as the Principal Chief Commissioner or Chief Commissioner) before issuing a notice for reopening.
• The amended Section 148 also specifically requires the Assessing Officer to provide reasons for reassessment, and the notice can only be issued if there is tangible and specific information that income has escaped assessment. Mere change of opinion or vague assumptions is no longer sufficient.

2. Important Court Judgments Post-Amendment (2021)

a) CIT v. Videsh Sanchar Nigam Ltd. (2022) 440 ITR 370 (SC)

• Issue: The Supreme Court dealt with the validity of a reassessment notice under Section 148, issued on the basis of an incorrect belief that the income had escaped assessment.
• Judgment: The Court emphasized that the notice for reopening should not be issued based on vague or incorrect information. The judgment highlighted the importance of following the “reason to believe” standard and not merely issuing notices based on incorrect or incomplete data. The ruling stressed that after the 2021 amendments, there is an added requirement of providing specific reasons for reassessment and approval from higher authorities before issuing notices.

b) Pr. CIT v. GKN Driveshafts India Ltd. (2021) 432 ITR 263 (SC)

• Issue: The Supreme Court dealt with the validity of the notice under Section 148, in the context of the information being inadequate or based on incorrect facts.
• Judgment: The Supreme Court ruled that a notice under Section 148 issued on the basis of incorrect information can be challenged. The Court also noted that, post-amendment (2021), the taxpayer has a right to be provided with reasons for reopening the assessment, and such reopening should not be made on mere change of opinion. The notice issued must be backed by valid and correct information that demonstrates income escaping assessment.

c) Union of India v. Ashish Agarwal (2022) 432 ITR 374 (SC)

• Issue: This case involved the reopening of assessment under Section 148 on the basis of information received from other sources. The notice was challenged on the grounds that the information used to issue the notice was incomplete or wrong.
• Judgment: The Supreme Court held that once an amendment was made to Section 148, the issuance of notice now requires the correct reasons to be provided. The notice cannot be issued on the basis of incomplete or incorrect information. The Court also noted that post-2021, reassessment notices must meet higher standards and be issued based on tangible, material evidence of income escaping assessment.

d) Rajendra Singh v. CIT (2021) 130 456 (Delhi HC)

• Issue: The Delhi High Court dealt with a case where the reassessment notice was issued under Section 148 based on incorrect or incomplete information, particularly in the context of amendments made by the Finance Act, 2021.
• Judgment: The Court observed that with the 2021 amendments, the reopening of assessment must be based on concrete facts and cannot rely on vague or incorrect information. The Court ruled that the notice was invalid as it was issued on the basis of incorrect assumptions. The Court held that the reassessment process must adhere to the principles of natural justice and must be based on correct facts.

e) Kishore Kumar & Co. v. Union of India (2022) 439 ITR 347 (Bombay HC)

• Issue: The Bombay High Court dealt with the issue of reopening assessments under Section 148 when the reasons provided for reassessment were based on incorrect or vague information.
• Judgment: The Court quashed the notice under Section 148, stating that after the 2021 amendment, the reason to believe must be based on verifiable and tangible material. The Court emphasized that reassessment notices cannot be issued solely based on incorrect or false information. The requirement for prior approval and providing valid reasons was reinforced, and the Court ruled that reopening on the basis of wrong facts violates the principles of law.

3. Post-2021 Amendments: Grounds for Invalidity

After the 2021 amendments, the grounds for invalidity of reassessment notices under Section 148 due to incorrect information are:

• The notice is issued without proper approval from the competent authority.
• The information relied upon by the Assessing Officer is incorrect, insufficient, or based on mere change of opinion.
• The Assessing Officer fails to provide specific reasons for reopening the assessment.
• The information used for issuing the notice does not genuinely suggest that income has escaped assessment.
• The notice is issued after the prescribed time limit for reopening.

Conclusion

The courts post the 2021 amendment; have placed stricter scrutiny on notices issued under Section 148. If the notice is based on incorrect or inadequate information, the courts have consistently held that such notices are invalid. The requirement for prior approval, tangible reasons, and adherence to natural justice standards under the amended provisions are required for validity of the notice.

(24). That having regard to the facts and circumstances of the case the jurisdiction assumed by the Ld AO for reopening of the case and assessment framed is wrong and is not in accordance with section 127 of the IT Act , 1961. The reopening is bad and assessment framed is to be made null and void as the jurisdiction of the case was with the Income Tax Department, XXXXX.

The assessee is Resident of XXXXXX. The Aadhaar card of the assessee(CB-2 to 3) mentions the address of the assessee as XXXXXX. All notices issued u/s 142(1) of the Act contain the address of the assessee at XXXXXX. Correspondingly the jurisdiction of the case of the assesse lies at XXXXX. The jurisdiction assumed by the assessing officer for issue of notice u/s 148 Dt. 27.03.2022 by XXXXX. ITO, New Delhi is wrong. It was the prime duty of the AO, XXXXX ,and New Delhi to transfer the case to AO at XXXXX as the assessee is resident of XXXXXX. Aadhaar card bears the address of XXXXX. The bank bears the address of XXXXX. The jurisdiction assumed by AO, XXXXX , New Delhi is wrong . The assesse relies on the following judgement. Earlier to Marriage 16-5-2010 . She was XXXXX. Name on the pan was changed from XXXXX to XXXXX in the month of May,2023. (CB- 4), (CB-69 to75)

Satya pal Vs. ITO (ITAT Delhi).

Territorial Jurisdiction or class of person Notification No. 70/2014 Dt. 13/11/2014. There is no such concept of Pan Jurisdiction under the law.

The entire control, office, income of the assessee is at XXXXXX. The territorial jurisdiction of the assessee lies with AO at XXXXXX not at New Delhi. Hence for the reopening by AO at New Delhi is without Jurisdiction and hence the Assessment is invalid.

The assessee relies on the Following 3 Judgements Ballu Singh Vs. ITO (ITAT Delhi). The notice u/s 148 is required to be issued by the Assessing Officer who is vested with the jurisdiction over the assesse 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 the Income tax Act. Clearly as per law the jurisdiction of the case lies with the Income tax department, XXXXX. The jurisdiction assumed by the AO, XXXXXX New Delhi is not in accordance with law hence the reopening and assessment framed thereafter is bad in law. Any order that is passed without jurisdiction is not valid in the eyes of law. The order passed u/s 148A (d) (CB- 6 to 8) passed dt. 27.03.2022 is without jurisdiction hence the notice issued u/s 148 is invalid correspondingly the entire assessment is null and void, passed without jurisdiction. It is the Pan which follows the jurisdiction and not vice versa. As held in Pr CIT -1 Vs. Capstone Securities Pvt. Ltd. deicide on 3-12-2022 BHC.

Satya pal vs ITO. (ITAT Delhi Dt 13-7-2023)

Prayer is made to the Hon’ble CIT (A), NFAC, New Delhi to consider the case of the assessee on the technical grounds and on merits and give a suitable relief to the assessee . Further prayer is made to give one more opportunity to the assessee if any further information, evidence in respect of the assessee with respect to any ground of appeal is required.

Also prayer is made to provide personal hearing or a virtual hearing to the assessee and his counsel to present his case in briefest possible manner

Prayer:

Prayer is made to the Ld. Ld CIT (A), NFAC, New Delhi to accept the amendment to the grounds of appeal, Additional grounds of appeal or deletion of the grounds of appeal; if any at the time of hearing and submission of written submissions and Paper Book.

Prayer is further made to the Ld. CIT (A), NFAC, New Delhi to accept the additional evidences u/r 46A(CB-85) of the Income Tax rules at the time of hearing and submission of written submissions and Paper book.

Thanking You,

(XXXXXX) Appellant (XXXXX)

XXXXXX