Income Tax Appellate Tribunal - Kolkata
Ito, Wd-47(3), Kolkata, Kolkata vs Sri Ramanand Kedia, Howrah on 13 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "C", BENCH KOLKATA
BEFORE SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM
आयकर अपील सं./ITA No.594/Kol/2015
( नधा रण वष /Assessment Year:2007-08)
ITO Ward-47(3), Vs. Sri Ramanand Kedia,
3, Govt. Place (West). 108/4/1, Adinath Apartment,
Kolkata-700001 G.T.Road, Howrah-711 106
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AKCPK 4042 N
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Revenue by : Shri Rajat Kumar Kureel, JCIT Sr.DR
Assessee by : Shri M.D.Shah, AR
सन
ु वाई क तार ख / Date of Hearing : 21/12/2016
घोषणा क तार ख/Date of Pronouncement 13/01/2017
आदे श / O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the assessee, pertaining to the Assessment Year 2007-2008, is directed against the order passed by ld.
Commissioner of Income Tax (Appeals)-14, Kolkata, in Appeal No.79/CIT(A)-14/Wd-46(3)/12-13, dated 13.03.2015, which in turn arises out of an order passed by the Assessing Officer (AO) Under Section 143(3) of the Income Tax Act 1961, (in short the 'Act'), dated 31.12.2009.
2. Brief facts of the case qua the assessee are that the assessee is an individual, engaged in the business of trading of cloths. Assessee filed his return of income on 29.10.2007 declaring total income of Rs.2,06,368/-. The case of the assessee was selected for scrutiny and statutory notice u/s.143(2) was issued. Thereafter the AO framed the assessment by making various additions.
2 ITA No.594/15Sri Ramanand Kedia
3. Aggrieved from the order of ld. AO, the assessee filed an appeal before the ld. CIT(A), who has also confirmed the additions made by the AO, by observing the followings :-
5.1.3 As regards the legality of the assessment proceedings, the A/R relied on the written submissions and contended that there was no valid service of notice under section 143(2) of the Act, whereas the notice is required to be served in accordance with the procedure laid down under Rule 12-15 of Order V of Civil Procedure Code, 1908. Relying on the decision of CIT v. Rajesh Kumar Sharma [2009] 311 ITR 235 (Dehi), the A/R contended that where the assessee denies receipt of such notice and the Assessing Officer claims that it has been received by some on behalf of the assessee, it is for the revenue to establish that the person to whom notice was served was authorized by the assessee to receive the same. In this affidavit, the appellant further stated that :-
"4. THAT the allegation that notice of hearing was served upon my minor daughter is also denied as my daughter did not handover any notice of hearing to me for the A. Y. 2007- 2008 and it may so happen that she unknowingly signed the Tear-off slip without understanding the implication thereof.
5. THAT in any event, service of notice upon minor daughter is not a valid service."
It is thus argued that the assessment proceedings are invalid.
5.1.4 Decision: I have considered the facts of the case and the arguments advanced on behalf of the appellant. The appellant denies to have receive notice under sec. 143(2) of the Act, in his sworn affidavit, he admitted that it may happen that his minor daughter unknowingly signed the Tear Off slip without understanding the implication thereof. His contention is that in any event, the service of notice upon minor daughter is not a valid service. Though the Assessing Officer stated that the appellant responded to notice under sec. 143(2) seeking for adjournment, he has not mentioned the date of service of the said notice. In CIT v. Avi-Oil India (P.) Ltd. [2010]323 ITR 242 (Punj.&Har.), it had been held that resort cannot be had to section 292B to validate mandatory requirement of service as postulated in section 143(2). As regards the last notice issued on 24-11-2009 fixing the hearing on 01-12-2009, the emotional finding of the Assessing Officer as earlier reproduced, has been that "Being encumbered by the luggage of non compliance setting aside volley of requests the assessee again lettered on 24-11-2009 to appear on 01-12-2009 to appear the date fixed for final opportunity but the letter was not served upon the assessee since the assessee was ignored to 3 ITA No.594/15 Sri Ramanand Kedia receive the same. The departmental Notice Server also mentioned the same. In view of the scenario it is clearly reflected that the proceedings does not appear to have cast an impact on the assessee for whom it lost its importance and significance within the frame work of the Act". The Assessing Officer admitted that the said notice under sec. 142(1) of the Act was not served. But, here again, he has not recorded any categorical finding that the assessee refused to receive the notice to entitle him to complete the assessment without providing another opportunity to the assessee. He has not followed other modes of service of notice under sec. 142(1) even if the earlier notices were deliberately ignored. In any case, this is a case where the Assessing Officer ought to have followed the first proviso to Section 144, where it is laid down that "such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment". Thus, from the facts, it is clear that the appellant was entitled for further opportunity to present his case. Lack of opportunity renders the assessment ab initio invalid. However, the second ground that the assessment is barred by limitation is without any evidence or merit and the same is rejected."
5.1.5 Now, coming to the merits of the case, the Assessing Officer has made the following additions to the income returned:
1. Unsecured loan given to Smt. Mina Devi Kedia Rs. 1,22,500/-
2. Sundry creditors as appearing in balance-sheet Rs.1 ,26,36,671/-
3. Disallowance of 20% out of telephone expenses Rs. 9,671/-
For personal use.
As regards the addition of Rs.1,22,500/ - on account of unsecured loan given to Smt. Mina Devi Kedia, it may be noted that section 68 comes into play only on account of credit entries and not in respect of an asset shown in the balance- sheet. This addition being frivolous is liable to be deleted. Regarding the addition on account of unexplained sundry creditors to the extent of Rs.1,26,36,671/-, the Assessing Officer noted that this was the closing balance against purchases to the tune of Rs. 2,58,07,063/-. The addition has been made under sec. 68 of the Act treating the sundry creditors as bogus and spurious because of non-compliance of the assessee with the statutory notices and failure to substantiate the claim in the return. In the first instance, the Assessing Officer has not afforded adequate opportunity to the appellant to comply with the statutory notices. Secondly, there is no evidence brought on record to remotely suggest that the Assessing Officer has made any effort to ascertain the real state of affairs of the appellant's business activities by conducting local enquiries or other enquiries as he deemed fit. Thirdly, the Assessing Officer has not disbelieved the 4 ITA No.594/15 Sri Ramanand Kedia trading account, especially the purchases, and therefore, without bringing even an evidence on record, he could not have treated the entire balance on account of sundry creditors as bogus or spurious. In Marghabhai Kishabhai Patel & Co. v. ClT [1977] 108 lTR 54(Guj), it has been held that Unless the transaction is proved as sham or not bona fide, it is not open to the tax authorities to disregard the figures of transactions shown in the assessee's books of account. This addition of Rs.1,26,36,671/- is also without proper appreciation of the facts and material placed on record. Therefore, the same is liable to be deleted. Coming to the disallowance on account of personal use of telephone at Rs.9671/-, in my view, looking to the extent of the business, the expenditure as claimed by the assessee could not be held to unjustified or unwarranted. In any case, the additions made without application of mind and without brining any cogent material on record or comparative study of past records, even if it is a best judgment, do not stand to the test of law.
5.1.6 In view of the foregoing facts and circumstances of the case, the assessment is annulled. The two grounds of appeal are accordingly allowed."
4. Not being satisfied with the order of ld. CIT(A), the Revenue is in further appeal before us and has taken the following grounds of appeal :-
1. that the Ld. CIT(A) erred in annulling the assessment without appreciating the fact that the assessment order was made as per law.
2. that the Ld. CIT(A) erred in rendering the assessment order void ab initio although sufficient opportunity were given to the assessee.
3. that the Ld. CIT(A) erred in holding that the addition of alleged unsecured loan of Rs.1,22,500/- was frivolous in nature.
4. that the Ld. CIT(A) erred in holding that the addition of Rs.1,26,36,671/- on account of Sundry creditors was made without proper appreciation of the facts.
5. that the Ld. CIT(A) erred in deleting the addition of Rs.9,671/-
on account of personal use of telephone.
6. that the appellant craves leave to add, alter and / or amend any of the grounds of appeal during the course of hearing.
5.Ld. Departmental Representative (DR) for the Revenue has submitted that the Ld. CIT(A) erred in annulling the assessment without appreciating the 5 ITA No.594/15 Sri Ramanand Kedia fact that the assessment order was made as per law. The Ld CIT(A) also erred in rendering the assessment order void ab initio although sufficient opportunity were given to the assessee.
The Ld DR for the Revenue also submitted before us that although the notice U/s 143(2) dated 15.09.2008 was served on the daughter of the assessee.
Though it is a fact that the daughter of the assessee was minor, till she is one of the closest family members of the assessee. It is very hard to believe that she would not handover the notice to her father or any senior member of the family.
The assessee is willfully taking the place of minority of his daughter to avoid his tax liability.
5.1 On the other hand, the ld AR for the assessee has submitted before us that "service of notice on Minor child" is not considered a valid service of notice of the assessee. That is, "service of notice on Minor child" is considered, as if no notice has been served on the assessee. The Ld. AR for the assessee has relied on section 15 of the Code of Civil Procedure,1908, which reads as under:
"Where service may be on an adult member of defendant`s family.
15.Where in any suit the defendant is absent from his residence at the time when the service of summons is sought to be effected on him at his residence and there is no likelihood of his being found at the residence within a reasonable time and he has no agent empowered to accept service of the summons on his behalf, service may be made on any adult member of the family, whether male or female, who is residing with him. Explanation- A servant is not a member of the family within the meaning of this rule"
Therefore, ld. AR for the assessee has submitted that there is no valid service of notice u/s.143(2) of the Act. If the statutory notice u/s.143(2) has not been served on the assessee then the AO does not have jurisdiction to make assessment. Ld. AR for the assessee has also 6 ITA No.594/15 Sri Ramanand Kedia submitted before us the affidavit submitted by the assessee before the ld.
CIT(A) :-
AFFIDAVIT I, RAMANAND KEDIA, son of SRI BAJRANGLAL KEDIA, aged about 57 years, at present resident at 108/1/1/1, Adinath Apartment, G.T.Road (North), Salkia, Howrah-711106, do hereby solemnly declare and affirm as under :-
1. THAT, in the Page 1 of true copy of purported Assessment Order for A.Y.2007-08 handed over to me on 21.09.2012, the Assessing Officer noted as under :-
"In compliance to the said notice a letter was received from the assessee reasoning for non-appearance on the said fixed for hearing"
2. THAT, the contents of the above observation, the Assessing Officer is not correct inasmuch as I did not sign any letter addressing the Assessing Officer in respect of adjournment of hearing and I did not receive any notice of hearing at all.
3. THAT, further the question of engaging any authorized representative on my behalf for representation of my case before the Assessing Officer for the A.Y.2007-08 did not arise at all as no notice of hearing was served upon me.
4. THAT, the allegation that notice of hearing was served upon my minor daughter is also denied as my daughter did not handover any notice of hearing to me for the A.Y.2007-08 and it may so happen that she unknowingly signed the Tear-off slip without understanding the implication thereof.
5. THAT, in any event, service of notice upon minor daughter is not a valid service.
That, the contents of the above paras are true to my personal knowledge and belief.
DEPONENT Ld. AR produced before us relevant para of Factories Act, 1948, wherein the definition of adult and child has been given, which is as under :-
1. The Factories Act, 1948
2. Interpretation.--
In this Act, unless there is anything repugnant in the subject or context,--
(a) "adult" means a person who has completed his eighteenth year of age;
(b) "adolescent" means a person who has completed his fifteenth year of age but has not completed his eighteenth year;
[(bb) "calendar year" means the period of twelve months beginning with the first day of January in any year;]
(c) "child" means a person who has not completed his fifteenth year of age;
7 ITA No.594/15Sri Ramanand Kedia
6. Having heard rival submissions and perused the material available on record, we are of the view that there is merit in the submissions of the ld. AR of the assessee, as the proposition canvassed by the ld. AR for the assessee are supported by facts narrated by him. As per Section 15 of the Code of Civil Procedure, the notice should be served at least on any adult member of the family and if the notice is served upon a minor child it would be presumed that it has not been served on the assessee at all.
The assessee has also explained before us the definition of the "child"
and "adult" and the same we have noted in the above para. The assessee also filed the affidavit before the CIT(A) stating that he was neither aware about the notice u/s.143(2) nor any statutory notice u/s.143(2) has been served on him. Therefore, considering the factual position we are of the view that the order passed by ld. CIT(A) is a reasoned order and does not require any interference. Therefore, we confirm the order passed by ld. CIT(A).
8. In the result, appeal filed by the revenue on all the grounds is dismissed.
Order pronounced in the open court on this 13/01/2017.
Sd/- Sd/-
(A.T.VARKEY) (DR. A.L.SAINI)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
कोलकाता /Kolkata; दनांक Dated 13/01/2017
काश $म&ा/Prakash Mishra,0न.स/ PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-ITO Ward-47(3) Kolkata.
2. यथ / The Respondent.-Sri Ramanand Kedia
3. आयकर आयु1त(अपील) / The CIT(A), Kolkata.
8 ITA No.594/15Sri Ramanand Kedia
4. आयकर आयु1त / CIT
5. 2वभागीय 0त0न5ध, आयकर अपील य अ5धकरण, कोलकाता / DR, ITAT, Kolkata
6. गाड8 फाईल / Guard file.
स या2पत 0त //True Copy// ु ार/ BY ORDER, आदे शानस उप/सहायक पंजीकार (Asstt. Registrar) आयकर अपील%य अ&धकरण, कोलकाता / ITAT, कोलकाता