In the absence of the notice under section 143(2), assessment framed by AO was liable to be quashed as invalid

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In the absence of the notice under section 143(2), assessment framed by AO was liable to be quashed as invalid

 

 

Income Tax Act, 1961, Section 143(3)

Income Tax Act, 1961, Section 147

Reassessment Validity Non-issuance of section 143(2) notice

Short Overview : In the absence of the notice under section 143(2), assessment framed by AO was liable to be quashed.

Assessee challenged validity of assessment framed under section 147/143(3) on the ground that no notice, if any, was ever issued under section 143(2) prior to completion of assessment proceedings. 

 

It is held that : In the absence of the notice under section 143(2), assessment framed by AO was liable to be quashed as invalid also when Pr. CIT has granted approval under section 151 in a mechanical manner by putting only ‘Yes’ which was not valid for initiating reassessment proceedings.

DecisionIn assessee’s favor.

Relied: Dharmender Kumar v. ITO, Ward 65(5), New Delhi decided in ITA No. 2728/Del/2018 relevant to assessment year 2008-09 : 2019 Tax Pub(DT) 6944 (Del-Trib) and Asstt. CIT v. Hotel Blue Moon (2010) 324 ITR 372 (SC) : 2010 Tax Pub(DT) 1434 (SC)

 

IN THE ITAT, DELHI BENCH

H.S. SIDHU, J.M.

Ram Niwas Jain v. ITO

ITA Nos. 6908 & 6909/Del/2019

7 January, 2021

Assessee by: V.K. Sabharwal, Advocate

Department by: Prakash Dubey, Sr. DR.

ORDER

H.S. Sidhu, JM

These appeals are filed by the assessee against the respective impugned orders both dated 28-6-2019 passed in the quantum appeal as well as in penalty appeal relating to assessment year 2010-11 by the learned Commissioner (Appeals)-13.

2. The grounds raised in the Quantum appeal No. 6908/Del/2019 read as under :–

1. That the order passed under section 147/143(3) of the Income Tax Act, 1961 on 10-11-2017 and upheld by the learned Commissioner (Appeals) on 28-6-2019, was perverse to the law and to the facts of the case, because no notice if any was ever issued under section 143(2) prior to complete the assessment proceedings, therefore, the assessment framed becomes barred by limitation.

2. That the order passed under section 143(3)/147 of the Income Tax Act 1961, was further illegal against the law and to the facts of the case, therefore, not tenable, because of getting and granting approval under section 151 of the Income Tax Act in a mechanical manner as putting Yes only by the Pr. CIT.

3. That the order passed was further wrong, because the appellant has already disclosed the bank account, in which total cash was deposited of Rs. 44,96,955 in his ITR filed on 03-3-2011, which has already been accepted as correct by the Deptt.

4. That the order passed under section 143(3)/147 was fundamentally wrong, because the appellant has already produced, filed and placed upon records the necessary evidence with regard to the deposit of entire cash of Rs. 44,96,955, which has not been taken into consideration by the assessing officer and by the learned Commissioner (Appeals) while upholding the additions of Rs. 7,45,118 vide her Order, dated 28-6-2019.

5. That the orders passed were further wrong as not tenable under the law and to the facts of the case, because the appellant is filing his ITR regularly as eligible under section 44AF of the I.T. Act 1961, therefore, in the preceding year i.e. 31.03.2009, he has disclosed his sundry debtors of Rs. 7,50,000 which has also been accepted as correct by the Deptt.

6. That prior to make and hold the additions of Rs. 7,45,118 by the assessing officer and by the learned Commissioner (Appeals), the appellant was not afforded the proper and reasonable opportunity of being heard.

7. That the orders passed by the learned Commissioner (Appeals) on 28.06.2019 was further perverse to the law and to the facts of the case, because the copy of remand report received from the assessing officer was only supplied on 21-6-2019 and the case was fixed for 24-6-2019, on this date the adjournment requested as the counsel was out of India, which was turned down as rejected, without any reasons, therefore, the appellate order so passed was against the law and natural justice.

8. That the order passed as upheld by the learned Commissioner (Appeals) was further not correct under the law and to the facts of the case, because of not adjudicating properly the documents produced and placed upon records with regard to the receipt and deposit of cash of Rs. 7,50,000 from sundry debtor, which has already been accepted as correct by the Deptt.

9. That the interest charged under section 234B and initiation of penalty proceedings under section 271(l)(c) of the Act, are further illegal as against the law and to the facts of the case.

10. That the appellant assails his right to amend, alter or change any grounds of appeal at any time even during the course of hearing of this instant appeal.

PRAYER:-

It is, therefore, prayed:

1. That the order passed under section 143(3)/147 of the Act, may please be quashed or alternatively the illegal and impugned additions made of Rs. 7,45,118 may please be deleted / quashed.

2. That the interest charged under section 234B and penalty proceedings initiated under section 271(l)(c) of the Act, may also be waived being consequential to the illegal and impugned additions made and relief claimed therefrom.

3. That any other relief which this Hon ble Court may please be deemed fit and proper on the facts and in the circumstances of the case.

It is prayed accordingly.

3. Later on the assessee has also filed the following additional grounds :–

1. That the order passed under section 147/143(3) of the I.T. Act, 1961, on 10-11-2017 for the assessment year 2010- 11 was further perverse to the law and to the facts of the case because of getting and granting approval under section 151 of the Income Tax Act in a mechanical manner as putting Yes Only by the Pr. CIT.

2. That the assessment order passed under section 147 /143(3) of the Income Tax Act, 1961 on 10-11-2017 for the assessment year 2010-11 was illegal and bad in law because no notice if any has ever been issued or to have been served under section 143(2) of the Income Tax Act, 1961

4. The grounds raised in penalty appeal No. 6909/Del/2019 read as under :–

1. That the penalty order passed on 21-5-2018 under section 271(l)(c) of the Act, is perverse to the law and to the facts of the case, therefore, not tenable, because of initiating the same in a routine manner without specification of any charge as contained at Page No. 2 of the assessment order passed on 10-11-2017, even in the notice issued, does not contain the initiation of any specific charge.

2. That the penalty order passed on 21-5-2018 becomes infrastructure as the ITAT set aside the quantum of additions made vide order reference no. ITA/5932/Del/2018 dated 01-4-2019.

3. That the penalty order passed as upheld by the learned Commissioner (Appeals) is also wrong on facts and erroneous on the point of law, because she has failed to consider that the penalty has been initiated in a routine manner in the assessment order and in the notice also, without specification of any charge.

4. That the penalty order passed is further perverse to the law and to the facts of the case, because the appellant has already produced, filed and placed upon records all the documents in support of the cash received and deposited during the year from sundry debtor with whom the payment was due to him, to the tune of Rs. 7,50,000 as on 31-3-2009, which has already been accepted as correct by the Deptt., as the appellant is filing his ITR under section 44AF of the Income Tax Act 1961.

5. That the penalty order passed is further not justified as correct, because in support of the receipt of cash from sundry debtor, the appellant has also produced, filed and placed upon records its proper confirmation which was not taken into consideration while finalizing the assessment proceedings, which the learned Commissioner (Appeals) has also failed to appreciate.

6. That no proper and reasonable opportunity if any has ever been afforded prior to initiate and levy the penalty by the assessing officer and by the learned Commissioner (Appeals) while adjudicating the said order.

7. That the appellant assails his right to amend, alter or change any grounds of appeal at any time even during the course of hearing of this instant appeal.

PRAYER;

1. That the illegal and impugned levy of penalty of Rs. 1,92,158 may please be quashed / cancelled.

2. That any other relief with this Hon ble Court may please be deemed fit and proper on the facts and in the circumstances of this case.

It is prayed accordingly.

5. The brief facts of the case are that the assessee filed his return of income declaring income of Rs. 1,98,452 on 31-3-2011 and the same was processed under section 143(1) of the Income Tax Act, 1961 (in short Act ). The case of the assessee was selected for scrutiny on the basis of AIR information available with the department that the assessee has made the cash deposit of Rs. 44,96,955 in his savings bank account with Punjab National Bank during the financial year 2009-10 relating to assessment year 2010-11. Accordingly, notice under section 148 of the Act was issued on 27-3-2017 after recording the reasons. In response to the same, the AR of the assessee filed a Letter dated 14-6-2017 stating that his return of income on 31-3-2011 may be treated his return of income in response to the notice under section 148 of the Act. In response to various statutory notices issued under section 142(1) of the Act, on different dates, the AR of the assessee appeared from time to time and filed necessary evidences supporting the claim of the assessee. During the course of assessment proceedings, the assessing officer noticed that the assessee had made the total cash deposits of Rs. 46,60,538 in savings bank account with Punjab National Bank during the financial year 2009-10 relevant to assessment year 2010-11 whereas the gross receipts as declared in Income Tax Return was Rs. 39,15,420. Assessee was required to explain the difference amount of Rs. 7,45,118 between the bank statement and income tax return. The explanation given by the assesee was not accepted by the assessing officer and lastly the assessing officer was of the view that addition of Rs. 74,518 under the head from other sources as per provisions of section 68 of the Act wherein any sum is found credited in the books of accounts of the assessee maintained for any previous years and the assessee has offered no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the assessing officer satisfactory, the sums so credited may be charged to income tax as the income of the assessee of that previous year and therefore, the assessing officer added Rs. 7,45,118 under section 68 of the I.T. Act in the total income of the assessee and also added Rs. 38,298 thus assessing the total income at Rs. 9,41,870 vide Order, dated 10-11-2017 passed under section 143(3)/147 of the Act. Aggrieved with the assessment order, assessee appealed before the learned Commissioner (Appeals), who vide his impugned Order, dated 28-6-2019 has partly allowed the appeal of the assessee. Against the impugned Order, dated 28-6-2019, assessee is in appeal before the Tribunal.

6. At the time of hearing, learned Counsel for the assessee draw my attention towards the aforesaid additional grounds in which assessee has submitted that the order passed under section 147/143(3) of the Act on 10-11-2017 for the assessment year in dispute is perverse to the law and the facts of the case because of getting and granting approval under section 151 of the I.T. Act, 1961 is in mechanical manner as putting Yes Only by the Pr. Commissioner of Income Tax. He further submitted that the assessing officer passed the Order, dated 10-11-2017 for the assessment year in dispute which is also illegal, bad in law, because no mandatory notice under section 143(2) of the Act was issued to the assessee prior to the completion of assessment Order, dated 10-11-2017. learned Counsel for the assessee hence, requested that in view of the Hon ble Apex Court decision in the case of NTPC v. CIT (1998) 229 ITR 389 (SC) : 1998 TaxPub(DT) 0342 (SC), the additional grounds may be admitted and adjudicated first. To support his arguments on these legal grounds, he relied upon the decision of the Hon ble Supreme Court of India in the case of CIT v. S. Goyanka Lime & Chemical Ltd. reported in (2015) 64 taxmann.com 313 (SC)2015 Tax Pub(DT) 5456 (SC) arising out of order of Hon ble High Court of Madhya Pradesh in CIT v. S. Goyanka Lime & Chemicals Ltd. (2015) 56 taxmann.com 390 (MP) : 2018 TaxPub(DT) 4342 (MP-HC) and the judgment of the Hon ble Supreme Court of India in the case of ACIT v. Hotel Blue Moon, (2010) 324 ITR 372 (SC) : 2010 TaxPub(DT) 1434 (SC). In view of above, he requested that both the legal grounds are covered in favour of the assessee by the aforesaid decisions, hence, the additional grounds may be decided in favour of the assessee. As regards penalty appeal is concerned, learned Counsel for the assessee submitted that the if the quantum appeal is decided in favour of the assessee, the penalty may also be deleted being infructuous.

7. On the contrary, learned DR relied upon the orders of the authorities below.

8. I have heard both the parties and perused the records especially the orders of the revenue authorities alongwith the contentions raised by the assessee in the additional grounds of appeal regarding nonissuance of notice under section 143(2) of the Act by the assessing officer and mechanical approval granted under section 151 of the Act by the Pr. CIT, I am of the view that both the additional legal grounds needs to be admitted in view of Apex Court decision in the case of NTPC v. CIT (1998) 229 ITR 389 (SC) : 1998 TaxPub(DT) 0342 (SC), hence, I admit the same.

8.1 I have also perused the assessment order and I am of the considered view that the assessing officer has completed the assessment under section 143(3)/147 of the Act on 10-11-2017 without issuing mandatory notice us. 143(2) of the I.T. Act, 1961 which is against the law laid down by the Hon ble Apex Court in the case of ACIT v. Hotel Blue Moon, (2010) 324 ITR 372 (SC) : 2010 TaxPub(DT) 1434 (SC)wherein, it has been held that in the absence of the notice under section 143(2) of the Act the assessment framed by the assessing officer is liable to be quashed. Even otherwise, I find that learned Pr. CIT has granted the approval in a mechanical manner by putting only Yes which is not valid for initiating the reassessment proceedings. Thereafter, the assessing officer has mechanically issued notice under section 148 of the Act. Keeping in view of the facts and circumstances of the present case and the case laws applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed, hence, the same is quashed and the addition in dispute is deleted. My aforesaid view is fortified by the following decisions including the ITAT, SMC, Bench, New Delhi decision dated 16-10-2019 in the case of Dharmender Kumar v. ITO, Ward 65(5), New Delhi decided in ITA No. 2728/Del/2018 relevant to assessment year 2008-09 : 2019 Tax Pub(DT) 6944 (Del-Trib) wherein the following case laws were followed on similar facts and circumstances of the case.

A) United Electrical Company (P) Ltd. v. CIT & Ors. (2002) 258 ITR 317 (Del.) : 2002 Tax Pub(DT) 1670 (Del-HC) In this case, approval by the Addl. CIT under section 151 was given in the following terms:-

Yes, I am satisfied that it is a fit case for issue of notice under section 148 of the Income Tax Act.

Analyzing, the above satisfaction/approval, it has been held that the CIT is required to apply his mind to the proposal put up to him for approval in the light to eh material relied upon by the assessing officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval. (Para 19).

(B) Hon ble Supreme Court of India in the case of CIT v. S. Goyanka Lime & Chemical Ltd. reported in (2015) 64 taxmann.com 313 (SC) : 2015 Tax Pub(DT) 5456 (SC) arising out of order of Hon ble High Court of Madhya Pradesh in CIT v. S. Goyanka Lime & Chemicals Ltd. (2015) 56 taxmann.com 390 (MP) : 2018 Tax Pub(DT) 4342 (MP-HC).

Section 151, read with section 148 of Income Tax Act, 1961 – Income escaping assessment – Sanction for issue of notice (Recording of satisfaction) – High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid – Whether Special Leave Petition filed against impugned order was to be dismissed – Held, Yes (in favour of the Assessee).

9. As regards the penalty appeal No. 6909/Del/2019 is concerned, since I have already quashed the reassessment and delete the addition in dispute in the quantum appeal, as aforesaid, hence, the penalty, does not stand in the eyes of law, therefore, the same is deleted as such, by also allowing this appeal of the assessee.

10. In the result, both the Appeals filed by the Assessee stand allowed.

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