Case Law Details
Gaurav Joshi Vs ITO (ITAT Amritsar)
The assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Amritsar, challenging the order of the Commissioner of Income Tax (Appeals), Jalandhar. The principal dispute related to the validity of reassessment proceedings initiated under Sections 147 and 148 of the Income Tax Act, 1961, as well as an addition made under Section 69 on account of deposits in bank accounts.
The assessee had filed a return of income on 08.08.2017 declaring income of Rs. 49,320. The return was filed in response to a notice issued under Section 148 on 30.03.2017. The Assessing Officer (AO) recorded reasons stating that, as per information available on record, the assessee had deposited cash of Rs. 1,39,28,640 during Financial Year 2009-10 relevant to Assessment Year 2010-11. Since no return had been filed for that year and there was no response to a letter seeking an explanation regarding the source of cash deposits, the AO formed a belief that income chargeable to tax had escaped assessment and issued a notice under Section 148.
Subsequently, the AO completed the assessment and determined the income at Rs. 6,71,915 after making an addition. Aggrieved by the assessment order, the assessee appealed before the CIT(A), challenging both the jurisdiction of the AO and the addition made. The CIT(A) rejected the jurisdictional objection on the ground that it had not been raised before the AO and also sustained the addition, holding that the AO had duly examined the explanation regarding bank deposits.
Before the Tribunal, the assessee argued that the reassessment proceedings were invalid because the notice under Section 148 had been issued by the Income Tax Officer, Ludhiana, whereas the assessment was ultimately framed by the Income Tax Officer, Jalandhar. The officer who completed the assessment had not issued any notice under Section 148. The assessee relied on the decision of the ITAT Agra Bench in Jawahar Lal Agarwal v. ITO. It was also contended that the reasons recorded for reopening referred to cash deposits of Rs. 1,39,28,640, whereas the assessment order itself recorded deposits of only Rs. 51,24,064. According to the assessee, the reasons recorded did not emerge from the material available on record and therefore could not support the reassessment proceedings. Reliance was placed on the Punjab and Haryana High Court decision in CIT v. Atlas Cycle Industries.
The Departmental Representative supported the orders of the lower authorities.
After considering the submissions and examining the record, the Tribunal observed that it was undisputed that the notice under Section 148 had been issued by the ITO, Ludhiana, while the assessment had been framed by the ITO, Jalandhar, who had not issued any notice under Section 148. Referring to the decision in Jawahar Lal Agarwal v. ITO, the Tribunal noted that under Section 147, the Assessing Officer having jurisdiction over the matter is required to form the belief regarding escapement of income and initiate proceedings. Respectfully following that decision, the Tribunal held that the assessment framed by an officer who had not issued the notice under Section 148 was liable to be quashed.
The Tribunal further observed that the reasons recorded for reopening referred to cash deposits of Rs. 1,39,28,640, whereas the assessment order recorded cash deposits of Rs. 51,24,064. Thus, the reasons recorded were not supported by the material available on record. Referring to the decision of the Punjab and Haryana High Court in Atlas Cycle Industries, the Tribunal held that where the grounds mentioned in the reassessment notice are found to be incorrect or non-existent, the Assessing Officer does not acquire jurisdiction to proceed with reassessment.
Applying the same principle, the Tribunal concluded that the reasons recorded by the AO were not found to exist on the record and therefore the reassessment proceedings were unsustainable. The Tribunal held that, viewed from any angle, the reassessment framed by the AO was not justified and accordingly quashed the reassessment. The appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITATAMRITSAR
This is an appeal by the assessee against the order dated 28.03.2018 of ld. CIT(A)-1, Jalandhar.
2. Following grounds have been raised in this appeal:
“1. That the order passed by the worthy CIT(A)-I, Jalandhar is against the law and facts of the case.
2. That having regard to the facts and circumstances of the case, the worthy CIT(A), Jalandhar is erred in law and on facts by confirming the action of Ld. AO in exceeding his jurisdiction and framing the impugned assessment order u/s 143(3) r.w.s. 147/148 and without complying with the mandatory conditions u/s 147/143(2)/151/127 as envisaged under the Income Tax Act, 1961.
3. That having regard to the facts and circumstances of the case, the worthy CIT(A), Jalandhar is erred in law and on facts by confirming the action of Ld. AO in making an addition of Rs.6,22,593/- u/s 69 of the Act on account of non declaration of cash and other deposits in bank accounts without considering the submissions of the assessee and without observing the principles of natural justice.
4. 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.”
3. The main grievance of the assessee vide ground no. 2 relates to the jurisdiction of the AO in reopening the assessment u/s 147 r.w.s 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act).
4. Facts of the case in brief are that the assessee e-filed the return of income on 08.08.2017 declaring an income of Rs.49,320/-. The said return was filed in response to the notice u/s 148 of the Act issued by the AO on 30.03.2017 on the basis of information with the department and by recoding the reasons as under:
“As per information available on record the assessee has deposited a cash of Rs.1,39,28,640/- during the F.Y. 2009-10 relevant to the assessment year 2010-11.
The assessee has not filed his return of income for the year under consideration. Letter was issued to the assessee to explain the sources of cash deposited, but there is no compliance. It means the assessee has no explanation to offer regarding the deposit of cash and same was deposited out of undisclosed sources of income.
Therefore, in my view, Rs.1,39,28,640/- has escaped assessment within the meaning of section 147/148 of the Income Tax Act for the period relevant to the assessment year 2010-11. Under the circumstances, I have reasons to believe that income of the assessee liable to tax has escaped assessment. Therefore, it is a fit case to issue of notice u/s 148 of the Income Tax Act, 1961.”
Sd/-
(Paramjit Kaur)
Income Tax Officer-1(5), Ludhiana
The AO framed the assessment at an income of Rs.6,71,915/- by making the addition of Rs.4,42,148/-.
5. Being aggrieved the assessee carried the matter to the ld. CIT(A) and raised the objection to the jurisdiction of the AO but the ld. CIT(A) did not find merit in that submission of the assessee by observing that this objection was not raised by the assessee before the AO. On the merit of the case also, the ld. CIT(A) sustained the addition by observing that the AO had duly examined and considered the explanation filed by the assessee regarding deposits in his bank account.
6. Now the assessee is in appeal. The ld. Counsel for the assessee submitted that in this case the proceedings u/s 147 of the Act were initiated by the ITO-1(5), Ludhiana while the assessment has been framed by the ITO-1(5), Jalandhar who had not issued any notice u/s 148 r.w.s. 147 of the Act. Therefore, the assessment framed without issuing the notice u/s 148 r.w.s. 147 of the Act was bad in law. Reliance was placed on the decision of the ITAT Agra Bench in the case of Jawahar Lal Agarwal Vs ITO in ITA No. 336/Agra/2014 reported at (2017) 51 CCH 0421 (copy of the said order was furnished which is placed on record). It was further submitted that in the reasons recorded, the AO mentioned the figure of Rs.1,39,28,640/- but in the assessment order no such figure was there and the AO himself admitted that the bank deposits were only of Rs.51,24,064/-. Therefore, the reasons recorded were not emerging from the record available with the AO and on the basis of wrong reasons recorded, the assessment reopened was not justified. The reliance was placed on the decision of the Hon’ble Jurisdictional High Court in the case o CIT Vs Atlas Cycle Industries reported at 180 ITR 319 (copy of the said order was furnished which is placed on record).
7. In his rival submissions, the ld. DR strongly supported the orders of the authorities below.
8. We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is an admitted fact that the ITO-1(5), Ludhiana issued the notice u/s 148 r.w.s. 147 of the Act, thereafter, the jurisdiction was transferred to the ITO-1(5), Jalandhar who never issued the notice u/s 148 of the Act but framed the assessment u/s 143(3) of the Act. On a similar issue, the ITAT Agara Bench in the case of Jawahar Lal Agarwal Vs ITO (supra) held as under:
“Now, as per section 147 of the Act, the AO may assess or reassess any income escaping assessment, if he has reasons to believe such escapement of income. The section starts with the words ‘If the Assessing Officer has reason to believe’. The word ‘Assessee’ in this phrase was substituted for the words ‘Income Tax Officer’ by the Direct Tax Laws (amendment) Act 1987, w.e.f. 1.04.1988. The same enactment also introduced section 2(7A) in the Act. As per this section, ‘Assessing Officer’-means an Officer, as named therein, who is vested with the relevant jurisdiction.
Thus, it was only the Officer having jurisdiction over the matter who, u/s. 147, could have formed any reason to believe escapement of income and none other. It has not been shown otherwise. To reiterate, in the present case, the ACIT-1 Agra, who recorded the reasons to believe escapement of income and issued the notice u/s 148 of the Act admittedly did not exercise jurisdiction over the matter. In fact, evidently, this was the reason why the matter was transferred from the ACIT-1, Agra to the ITO 4(2) Agra. Therefore, the formation of the reasons to believe escapement of income is in direct violation of the provisions of section 147 of the Act.
Then, section 147 also provides that the Assessing Officer, if he has reason to believe escapement of income, he may assess or reassess such income subject to the provision of sections 148 to 153 of the Act. So, the assessment or reassessment u/s 147 is subject to, inter alia, the Act.
In view of the above, Tribunal held that since the reasons to believe escapement of income in this case were recorded by the AO who did not exercise the relevant jurisdiction, i.e., jurisdiction over the matter, such reasons are non-est, being inflagrant violation of the express provisions of section 147 read with those of section 2(7A) of the Act. These reasons are, thus, struck down as void ab initio, null and void. Since the reasons to believe escapement of income themselves have been declared null and void, all proceedings in furtherance thereof, culminating in the impugned order are also void ab initio and are quashed as such.”
So, respectfully following the aforesaid referred to order, the assessment framed by the AO who had not issued notice u/s 148 r.w.s. 147 of the Act is quashed.
9. It is also relevant to point out that the AO while issuing the notice u/s 148 of the Act has mentioned that the assessee had deposited a cash of Rs.1,39,28,640/- during the financial year 2009-10 in the bank account which had escaped assessment. On the contrary, in the assessment order, he mentioned that the cash deposited in the bank account of the assessee was Rs.51,24,064/-, which is evident from para 8.3 off the assessment order dated 14.12.2017. Therefore, the reasons recorded by the AO were not emerging from the record available with him.
10. On a similar issue, the Hon’ble Jurisdictional High Court in the case of CIT Vs Atlas Cycle Industries (supra) held as under:
“9. Adverting to the question referred regarding the reassessment proceedings, we are of the view that the Tribunal was right in cancelling the reassessment as both the grounds on which reassessment notice was issued were not found to exist, and the moment such is the position, the ITO does not get the jurisdiction to make a reassessment. This view of ours finds support from the Supreme Court decisions in CIT vs. A. Raman & Co. (1968) 67 ITR 11 (SC) and Bankipur Club Ltd, vs. CIT 1972 CTR (SC) 245 : (1971) 82 ITR 831 (SC) . Similar view has been taken by the Rajasthan High Court in Addl. CIT vs. Ganeshilal Lal Chand (1984) 43 CTR (Rai) 120 : (1985) 154 ITR 274 (Raj). , On behalf of the Revenue, CIT vs. Ahmedabad Manufacturing and Calico Printing Co. Ltd. 1976 CTR (Gui) 214 : (1977) 106 ITR 159 (Gui), a decision of the Gujarat High Court was cited. On a consideration of the matter, we are of the view that in view of the aforesaid Supreme Court decisions, the view taken by the Rajasthan High Court is correct and the view taken by the Gujarat High Court is not correct. Accordingly, we dissent from the view taken by the Gujarat High Court and in view of the decisions of the Supreme Court and Rajasthan High Court, we hold that the ITO did not have the jurisdiction to proceed with the reassessment, the moment he found the two grounds mentioned in the reassessment notice incorrect or non-existent. Accordingly, we answer the referred question in favour of the assessee, in the affirmative, that the Tribunal was right in cancelling the reassessment.”
11. In the present case also, the AO recorded the reasons which were not found to exists on the record, therefore, the reassessment framed deserves to be quashed. In view of the aforesaid discussion, we are of the confirmed view that viewed from any angle, the reassessment framed by the AO was not justified, hence quashed.
12. In the result, the appeal of the assessee is allowed.
(Order Pronounced in the Court on 16/01/2019)
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