Case Law Details
Kavita Samtani Vs DCIT (ITAT Jaipur)
The Income Tax Appellate Tribunal (ITAT) in Jaipur has set aside the assessment order issued by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)] for Smt. Kavita Samtani, an assessee involved in a series of assessments related to financial years 2013-14 and 2015-16 through 2018-19. The decision concluded on October 22, 2024, follows a detailed examination of procedural adherence, alleged financial discrepancies, and the validity of issued notices under the Income Tax Act.
Background and Appeal Details
Kavita Samtani, a business owner running a beauty salon, appealed against five assessment orders stemming from a search and seizure operation on March 29, 2018. The search targeted her residential property, her husband’s business location, and other family properties. During the operation, various financial documents, ledgers, and loose papers were seized, including a ledger involving financial transactions with M/s Mohan Broker Agency, a firm managed by her husband, Deepak Samtani.
The assessments raised questions on cash transactions recorded in the ledger of M/s Mohan Broker Agency for FY 2012-13. Transactions amounting to ₹2,90,000 were noted as credits to M/s Mohan Broker Agency, alleged to exceed the declared income of Kavita Samtani for the relevant period. The AO treated these amounts as unexplained investments under Section 69 of the Income Tax Act, thereby prompting additional tax liabilities.
Points of Contention and Tribunal’s Observations
One of the main points raised by the appellant’s representative was the procedural aspect under which notices should have been issued. Citing Section 153C, the appellant argued that any notice issued to a third party must adhere to this section, which mandates the application of assessment protocols under Section 153A. The representative also highlighted that the appellant was not directly asked to clarify the cash deposits, despite the AO’s claim of having provided such an opportunity.
Regarding the financial transactions with M/s Mohan Broker Agency, the appellant contended that the amounts represented unsecured loans recorded in her husband’s business ledger, thus not warranting additional scrutiny under Section 69. The tribunal found merit in this argument, noting that the transactions were indeed recorded in the husband’s books, which served to verify the legitimacy of the appellant’s claims.
Procedural Irregularities Noted
The appellant raised additional procedural concerns, including the lack of a Document Identification Number (DIN) on the assessment order, non-adherence to digital signing protocols outlined by the Central Board of Direct Taxes (CBDT), and absence of mandatory approval as per Section 153D of the Act. Although these points were raised for academic purposes during the hearing, the ITAT acknowledged them in its final decision, indicating lapses in procedural compliance by the AO.
The tribunal concluded that the procedural missteps and lack of clear evidence regarding the alleged undisclosed investments rendered the assessment order invalid. The assessment was found inconsistent with the requirements under Section 153A, as mandated by the provisions of Section 153C. The tribunal thus ruled in favor of the appellant, setting aside the orders by both the AO and CIT(A).
Implications of the ITAT Decision
The ITAT’s decision in favor of the appellant underscores the necessity for tax authorities to strictly adhere to procedural guidelines, especially when conducting assessments based on search and seizure outcomes. The tribunal’s ruling effectively annuls the assessment, relieving Kavita Samtani from the proposed tax liabilities associated with the disputed financial transactions.
The tribunal’s decision is expected to impact similar cases where procedural compliance is contested under Sections 153C and 153A, particularly regarding third-party assessments following search operations.
Verdict
The ITAT Jaipur’s order, pronounced on October 22, 2024, allows Kavita Samtani’s appeal, nullifying the impugned order of CIT(A) and the assessment by the AO. The tribunal has instructed that the case records be archived post-closure, effectively marking the conclusion of this legal proceeding.
Assessee was represented by Shri Mahendra Gargieya Adv
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The above captioned appeal is one of the five appeals filed by Smt. Kavita Samtani, while’ challenging five orders separately passed by id. CIT(Appeal), relating to Assessment Year’s 2013-14 & 2015-16 to 2018-19 disposing of the appeals filed by the assessee in respect of five separate assessment orders.
2. Vide impugned order dated 27.10.2023, Learned CIT(Appeal) has upheld the assessment framed, in respect of assessment year 2013-14.
3. Assessee-appellant claims to be in the business of running a beauty parlour, namely, Sophiya Beauty Parlour. On 29.03.2018, a search and seizure action u/s 132 of the Act was carried out at the residential premises of the assessee and her husband Sh. Deepak Samtani, in addition to the business premises of the husband.
4. Search and seizure action was also carried at the residential and business premises of the family members of Sh. Deepak Samtani. The search led to recovery of incriminating material including documents/loose papers/books of, accounts. The incriminating material was entered into inventories and seized.
5. Notice u/s 143(2) of the Act was issued to the assessee on 16.07.2019. She replied thereto. At the same time, she filed return of income.
6. When the assessment order was challenged by the assessee, by way of appeal, Learned CIT(Appeal) dismissed the appeal.
7. Arguments heard. File perused.
8. As noticed above, on search and seizure operation conducted on 29.03.2018, various documents were seized. Said documents included one ledger pertaining to M/s Mohan Broker Agency.
The assessee came up with the version that the said ledger pertained to M/s Mohan Broker Agency, the proprietorship concern of her husband, and related to the Assessment Year 2017-18.
The Assessing Officer observed that relevant documents reflected that the assessee-appellant had given to M/s Mohan Broker Agency, a sum of Rs. 2,00,000/- on 28.09.2012; a sum of Rs. 40,000/- on 06.10.2012; and Rs. 50,000/- on 08.01.2012: and further that this amount was much more than the income of the assessee during the Financial Year 2012-13.
The assessee did not offer any explanation regarding said credits of Rs. 2,90,000/-, which, in the opinion of the Assessing Officer attracted provisions of section 69 of the Act.
9. One of the contentions raised by Id. AR for the appellant is that the appellant was never questioned about the source of the cash deposit. In the paper book submitted on 22.05.2024, at page Nos. 6 to 8 is available copy of the Annexure appended to the notice issued u/s 142(1) to the assessee.
As per para 12 of said Annexure, the assessee was called upon to provide details/ source of investments made, as per her account available in the ledger M/s Mohan Broker Agency. Therefore, it cannot be said that the assessee was not questioned by the Assessing Officer about the source /details of investments made.
Ld. AR for the appellant submitted that on 22.07.2012, the assessee furnished her Income tax return declaring total income of Rs. 1,85,563/-and that even in response to the notice u/s 153A of the Act, the assessee furnished her Income tax return declaring the same amount of income. This amount consisted of Rs. 1,44,000/- by way of income from business and professions, and a sum of Rs. 41,563/- by way of income from other sources.
Ld. AR for the appellant has referred to copy of statement of account of M/s Mohan Broker Agency; bank statement of account of M/s Mohan Broker Agency, as available at page No. 24 of the paper book, and submitted that during the assessment proceedings, the assessee was called upon to give details and name of the address of the persons with whom deposit was made, and in reply thereto vide letter dated 08.12.2019, page No. 9 & 10 of the paper book, appellant submitted that she had given an unsecured loan of Rs. 2,90,000/- to M/s Mohan Broker Agency.
The contention is that when her husband had recorded entries in the books of accounts showing the assessee- his wife as a creditor for Rs. 2,90,000/-,making of addition by the Assessing Officer was unjustified.
11. In her reply dated 08.02.2020, the assessee submitted that during the year, she had given a sum of Rs. 2,90,000/- by way of deposit to M/s Mohan Broker Agency; that she was not. maintaining any regular books of accounts; and that in the return of income, she had shown receipts from her Beauty Parlor.
It is not in dispute that M/s Mohan Broker Agency is proprietorship concern of husband of the assessee; that in the account of the assessee ire the ledger of,the said proprietorship concern, three transactions pertaining to credit of Rs: 2,90,000/- stand reflected.
Section 69 of the Act comes into application where an assessee has made investments, which are found to have not been recorded in the books of accounts if. any, maintained by the said assessee.
This is a case. where, according to the assessee,, she was neither maintaining nor required to maintain any books of accounts, but three transactions on 28.09.2012, 06.10.2012 and 08.10.2012, regarding said credits, in total of Rs. 2,90,000/-, stand recorded in the ledger of M/s Mohan Broker Agency, the proprietorship of her husband.
Ld. AR for the appellant has referred to page 24 of the Paper Book. This is copy of statement of account from the books of M/s Mohan Broker Agency. As per entry dated 1.10.2012 a sum of Rs. 2 lacs was paid by way of cheque; vide entry dated 8.10.2012 a sum of Rs.40,000/-was deposited in cash and vide another entry of same date a sum of Rs. 55,000/-was deposited by way of cheque.
Ld. AR has submitted that having regard to the income of the assessee-appellant during the previous 3 years, it can not be said that she could not explain the source of said money transferred to Mohan Broker Agency.
The credit entries in the account of the assessee as reflected in the ledger of M/s Mohan Broker Agency, express the nature of the transaction.
Accordingly, we find merit in the contention raised by Id. AR for the assessee that when three transactions stood recorded in the account books of proprietorship concern of the husband of the assessee, it cannot be said that it was a case of any incriminating material against the assessee:
12. It has also been contended on behalf of the appellant that in the given facts and circumstances, notice under section 153C of the Act was required to be issued to the assessee, but the assessment has been framed under section 153A r.w.s.153B of the Act, and even on this ground the assessment deserved to be set aside.
13. As per provisions of section 153C of the Act, notice required to be issued to the other person would be a notice under section 153C of the Act, but even then assessment is to be framed in accordance with the procedure prescribed under section 153A of the Act.
14. It may be mentioned here that subsequently, during pendency of the appeal, on behalf of the appellant an application came to be presented with the prayer seeking permission to raise three grounds mentioned therein. First additional ground is that no DIN number having been generated as regards the impugned assessment order, same is nullity being non-est. Second additional ground is that the impugned assessment order has not been digitally signed as per procedure prescribed by CBDT, same is non-est. The third additional ground is that no, prior approval, as mandated by section 153D of the Act was obtained and as such the impugned assessment has been framed without any jurisdiction
In this regard, it may be mentioned that as noticed above, the impugned order passed by Learned CIT(A) and the impugned assessment framed by the Assessing Officer deserve to be set aside, for the above said discussion and reasons, the three additional grounds sought to be raised on behalf of the appellant for academic purposes, are not being taken up, No other argument has been advanced before us.
Result
15. In view of the above findings, the appeal is allowed and as such the impugned order passed by Learned CIT(A) and the impugned assessment framed by the Assessing Officer are hereby set aside.
File be consigned to the record room after the needful is done by the office. Order pronounced in the open court on 22/10/2024.
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