ACIT Vs Pawan Cargo Forwards Pvt. Ltd (ITAT Chennai)
Background:
Revenue filed appeal against CIT(A)’s order deleting reassessment framed u/s 147/144B in the case of Pawan Cargo Forwards Pvt. Ltd. for AY 2013-14. AO had made additions on penny stock LTCG (scrip: Wagend Infra Ventures Ltd.) based on Investigation Wing report & director’s statement of Gateway Financial Services Ltd. AO alleged accommodation entries & treated LTCG as bogus. CIT(A) quashed reassessment holding that notice u/s 148 issued by Jurisdictional AO (JAO) instead of Faceless AO (FAO) was invalid per CBDT Notification dated 29.03.2022.
Assessee also filed cross objections challenging validity of reassessment on grounds of jurisdiction, second notice illegality, absence of 143(2) notice, non-issuance of DIN, & lack of approval u/s 151.
Revenue’s Grounds:
- CIT(A) erred in holding notice u/s 148 barred by limitation ignoring CBDT’s TOLA extension & SC ruling in Ashish Agarwal.
- CIT(A) wrongly held that JAO lacked jurisdiction; argued that Scheme 2022 empowered JAO also.
- Additions on penny stock LTCG (share price rigged 4400% in 90 days) should have been upheld, relying on Sanjay Bimalchand Jain (Bom HC), Nand Kishore Agarwal (Cal HC) & Uttamchand Mehta (Guj HC).
Assessee’s Stand :
- Notice u/s 148 dated 30.07.2022 issued by JAO, not FAO, violates CBDT’s faceless reassessment scheme of 29.03.2022.
- Reassessment void for lack of 143(2) notice, multiple 148 notices, & non-compliance with mandatory approval & DIN requirements.
- Additions made on “borrowed satisfaction” without independent application of mind.
Tribunal’s Findings:
- CBDT Notification 29.03.2022 mandates reassessment & 148 notices to be issued in faceless manner through automated allocation.
- In this case, notice dated 30.07.2022 was issued by JAO (DCIT, LTU Circle-1, Chennai), not FAO, thus violating mandatory scheme.
- Jurisdictional Madras HC in TVS Credit Services Ltd v. DCIT & Bombay HC in Hexaware Technologies Ltd held that FAO must issue notices; JAO-issued notices invalid. Telangana HC in Kankanala Ravindra Reddy & Ta Infra Projects Ltd. followed same.
- SC dismissed Revenue’s SLP against Telangana HC’s ruling (Deepanjan Roy case).
- Respectfully following HC & SC rulings, Tribunal held notice u/s 148 invalid; entire reassessment vitiated.
Tribunal’s Conclusion:
- Revenue’s appeal dismissed.
- Assessee’s cross objection infructuous (since reassessment quashed).
- Liberty kept open: if SC later reverses Hexaware principle, Revenue may seek revival of appeal.
ITAT Chennai quashed reassessment in Pawan Cargo Forwards’ case, holding JAO-issued 148 notice invalid under faceless scheme. Penny stock LTCG addition deleted.
