Income Tax Appellate Tribunal - Delhi
Myung Hwan Lee, Dehradun vs Adit (International Taxation), ... on 25 May, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE HON'BLE PRESIDENT, SHRI G.D. AGRAWAL
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.2100/Del./2016
(ASSESSMENT YEAR : 2005-06)
ITA No.2101/Del./2016
(ASSESSMENT YEAR : 2006-07)
Myung Hwan Lee, vs. ADIT,
Employee of Hyundai Heavy Industries Co. Ltd., International Taxation,
C/o Hemant Arora & Co. CAs, Dehradun.
1, Tyagi Road,
Dehradun - 248 001.
(PAN : ACAPL0036H)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri S.D. Kapila, Advocate
Shri R.R. Maurya, Advocate
REVENUE BY : Shri Surinder Pal, Senior DR
Date of Hearing : 15.05.2018
Date of Order : 25.05.2018
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
Since common questions of facts and law have been raised in both the aforesaid appeals, the same are being disposed of by way of consolidated order to avoid repetition of discussion.
2. The appellant, Myung Hwan Lee (hereinafter referred to as 'the assessee') by filing the present appeal, sought to set aside the 2 ITA No.2100/Del./2016 ITA No.2101/Del./2016 impugned orders both dated 15.02.2016 passed by Ld. CIT (Appeals)-2, Noida on the grounds inter alia that :- "ITA No.2100/Del/2065
1. That on the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in law and on facts in upholding the reassessment order passed u/s 147 r.w.s. 148 by the Ld. Assessing Officer {'Ld. AD ,}, inter alia, because:
1.1. The re-assessment proceedings were without jurisdiction, there being, undisputedly, no service of notice u/s 148 of the Act on the appellant.
1.2. That a mere opportunity to inspect the assessment record provided by the Ld. AO to the counsel of the appellant does not meet the requirements of section 148 in so far as a valid service of notice is concerned.
1.3. That in the absence of any service of notice u/s 148 there was no jurisdiction with the Ld. AO to initiate, proceed with and complete re-assessment proceedings.
3. That without prejudice, on the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in upholding that the Ld. AO at Dehradun had the jurisdiction to make a reassessment u/s 147 of the Act inter alia because:
2.1. It is an undisputed fact that the jurisdictional AO i.e. ACIT International Taxation, Dehradun never issued any notice u/s 148, leave alone the fact whether or not any notice was ever served on the Appellant.
2.2. The very foundation of the jurisdiction to make a reassessment is the issue and service on the assessee of a valid notice u/s 148 read with section 147 and in the present case the alleged notice dated 28.3.12 issued u/s 148 by ITO 16(2) Mumbai does not satisfy the test of valid issuance of a notice by jurisdictional AO.
2.3. The ITO 16(2) Mumbai had no jurisdiction 111 the matter a fact that remains uncontroverted by the Revenue.3 ITA No.2100/Del./2016
ITA No.2101/Del./2016 2.4. That the alleged notice dated 28.3.12 issued u/s 148 has not been served on the appellant at any state and remains on the file of the Revenue till date.
3. That the Hon'ble CIT(A) has erred in law and of facts by not appreciating the fact that the Ld. AO did not follow the Apex Court laid down procedure with regards to re-opening of assessment in so far as neither were the reasons for re-opening furnished to the appellant nor were the appellant's objections against non-service of any notice u/s 148 met with by the Ld. AO. The Ld. AO has clearly violated the procedure laid down by the Hon'ble Supreme Court in GKN Driveshaft's case in 259 ITR 19 (SC) and on this score alone the re-assessment order deserves to be cancelled.
4. That without prejudice, the Ld. AO has erred in not appreciating the facts that the appellant was a non-resident foreign expatriate working as a General Manager with the Indian Liaison office of Hyundai Heavy Industries Company Limited and was a man with sufficient means, the mere fact that in one particular year his taxable salary income was lesser than the total fee paid by him to the School that by itself could not be a reason to believe that there was an escapement of income chargeable to tax within the meaning of section 147 of the Act."
ITA No.2101/Del/2016
"1. That on the facts and circumstances of the case, the Ld. AO has erred in making an addition of Rs.33,63,559/- on account of school fee paid by the appellant for his son as against the actual amount of the school fee of Rs.8,22,213/-.
2. That on the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in law and on facts in upholding the reassessment order passed u/s 147 r.w.s. 148 by the Ld. Assessing Officer {'Ld. AO '}, inter alia, because:
2.1. The re-assessment proceedings were without jurisdiction, there being, undisputedly, no service of notice u/s 148 of the Act on the appellant.
2.2. That a mere opportunity to inspect the assessment record provided by the Ld. AO to the counsel of the 4 ITA No.2100/Del./2016 ITA No.2101/Del./2016 appellant does not meet the requirements of section 148 in so far as a valid service of notice is concerned.
2.3. That in the absence of any service of notice u/s 148 there was no jurisdiction with the Ld. AO to initiate, proceed with and complete re-assessment proceedings.
3. That without prejudice, on the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in upholding that the Ld. AO at Dehradun had the jurisdiction to make a reassessment u/s 147 of the Act inter alia because:
3.1. It is an undisputed fact that the jurisdictional AO i.e. ACIT International Taxation, Dehradun never issued any notice u/s 148, leave alone the fact whether or not any notice was ever served on the Appellant.
3.2. The very foundation of the jurisdiction to make a reassessment is the issue and service on the assessee of a valid notice u/s 148 read with section 147 and in the present case the alleged notice dated 28.3.12 issued u/s 148 by ITO 16(2) Mumbai does not satisfy the test of valid issuance of a notice by jurisdictional AO.
3.3. The ITO 16(2) Mumbai had no jurisdiction In the matter a fact that remains uncontroverted by the Revenue.
3.4. That the alleged notice dated 28.3.12 issued u/s 148 has not been served on the appellant at any state and remains on the file of the Revenue till date.
4. That the Hon'ble CIT(A) has erred in law and of facts by not appreciating the fact that the Ld. AO did not follow the Apex Court laid down procedure with regards to re-opening of assessment in so far as neither were the reasons for re-opening furnished to the appellant nor were the appellant's objections against non-service of any notice u/s 148 met with by the Ld. AO. The Ld. AO has clearly violated the procedure laid down by the Hon'ble Supreme Court in GKN Driveshaft's case in 259 ITR 19 (SC) and on this score alone the re-assessment order deserves to be cancelled.5 ITA No.2100/Del./2016
ITA No.2101/Del./2016
5. That without prejudice, the Ld. AO has erred in not appreciating the facts that the appellant was a non-resident foreign expatriate working as a General Manager with the Indian Liaison Office of Hyundai Heavy Industries Company Limited and was a man with sufficient means, and that in the financial year 2005-06 relevant to AY 2006- 07, the appellant has earned and offered to tax salary income of Rs.17,79,500/- in India, and that the payment of tuition fee of Rs.8,22,213/- for his son, Master Ji Won, could have been easily covered by his salary income alone."
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee is an employee of Hyundai Heavy Industries Co. Ltd.. From the AIR information, Assessing Officer noticed that the assessee has paid an amount of Rs.8,22,213 as school fee of his Ward (Ji Won) and has further made payment of Rs.33,63,559/- as school fee during AYs 2005-06 & AY 2006- 07 respectively. Hence, case was reopened under section 147 of the Income-tax Act, 1961 (for short 'the Act') for both the assessment years 2005-06 and 2006-07. Assessee has not filed fresh return in compliance to the notice u/s 148 of the Act. AO proceeded to hold that in AY 2005-06, assessee filed return declaring income of Rs.17,74,900/- (salary income) which was filed by non-resident company as an agent of Mr. M.H. Lee. Out of the salary income of Rs.17,74,900/-, amount of Rs.6,12,000/- was offered as perquisites leaving an amount of Rs.11,62,900/- as salary in the hands of assessee on which he has paid an amount of Rs.5,68,259/- as income-tax. So, after making payment of 6 ITA No.2100/Del./2016 ITA No.2101/Del./2016 Rs.5,68,259/-, an amount of Rs.5,94,641/- was left with the assessee during AY 2005-06 to meet with its household and other expenses whereas he has paid an amount of Rs.8,22,213/- as school fee during the year. On failure of the assessee to bring on record, the evidence for availability of funds, addition of Rs.8,22,213/- is made u/s 68 of the Act for AY 2005-06.
3. Similarly, assessee's return of income of Rs.17,79,500/- for AY 2006-07 was filed by non-resident company out of which amount of Rs.4,62,000/- was offered as prerequisites and on the remaining amount of Rs.13,17,500/-, assessee paid tax of Rs.5,42,880/- as income-tax and has left with an amount of Rs.7,74,620/-. However, the assessee has paid an amount of Rs.33,63,559/- as school fee. AO proceeded to conclude that it is most unlikely that the assessee has funds to make this investment for which no evidence has been brought on record and consequently addition of Rs.33,63,559/- is made u/s 68 of the Act for AY 2006-07.
4. Assessee carried the matter by way of appeals before the ld. CIT (A) who has confirmed the additions by dismissing the appeals. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeals. 7 ITA No.2100/Del./2016
ITA No.2101/Del./2016
5. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
6. Undisputedly, the assessee is a Korean national working with Hyundai Heavy Industries Co. Ltd.. It is also not in dispute that assessment was reopened on the basis of information gathered from AIR by the AO. It is also not in dispute that notice u/s 148 was issued by ITO - 16 (2), Mumbai. It is also not in dispute that the assessee has filed return of income at Rs.17,74,900/- and Rs.17,79,500/- for AY 2005-06 & 2006-07 respectively and has not preferred to file the return after issuance of the notice u/s 148 of the Act.
7. The first contention raised by the ld. AR for the assessee challenging the additions made by AO for AYs 2005-06 & 2006- 07 and confirmed by ld. CIT (A) is that no valid notice u/s 148 of the Act has been issued or served upon the assessee and as such, the AO was having no jurisdiction to initiate and complete the reassessment proceedings.
8. Undisputedly, the assessee is a Korean citizen working with Hyundai Heavy Industries Co. Ltd. (HHI), Korean was on deputation with HHI Liaison Office, Mumbai during the period 8 ITA No.2100/Del./2016 ITA No.2101/Del./2016 December 2004 to December 2007. It is also not in dispute that first notice under section 148 was issued by Income-tax Officer - 16(2), Mumbai on 28.03.2012 by registered post at the address Flat No.2, 4th Floor, Suraj Apartments, 71, Bhulabhai Desai Road, Mumbai which was returned with postal remarks "left". It is also not in dispute that the assessee has filed his return of income for AYs 2005-06 and 2006-07 with AO, Dehradun having been processed u/s 143(1). It is also not in dispute that a notice dated 25.10.2012 u/s 142 (1) of the Act was served upon on Mr. Laxman Daga who was the earlier landlord of assessee who has forwarded the same to HHI on 12.11.2012 intimating ITO, Ward No.16 (2) vide letter dated 03.12.2012 that the assessee is assessed to tax with ADIT, International Taxation, Dehradun u/s 2 (7A) of the Act. It is also not in dispute that the then ITO, Mumbai transferred assessee's case to AO, Dehradun who has issued the notice dated 05.03.2013 u/s 142 (1) which was served upon M/s. Hemant Arora and company, counsel of HHI.
9. In the backdrop of the aforesaid facts and circumstances of the case, order passed by ld. Revenue authorities below, arguments advanced by ld. AR for the parties, the sole question arises for determination in this case is :-
9 ITA No.2100/Del./2016
ITA No.2101/Del./2016 "as to whether a valid notice was issued to the assessee u/s 148 of the Act for reopening of the assessment for AYs 2005-06 and 2006-07?"
10. The ld. AR for the assessee brought on record vide Notification No.9579 dated 05.08.1994 conferring jurisdiction in respect of foreign companies and employees of non-resident companies which is extracted for ready perusal as under :-
"SECTION 120 In exercise of the powers conferred under section 120 of the Income-tax Act, 1961 (43 of 1961) and of all other powers enabling it in this behalf, the Central Board of Direct Taxes makes the following amendment to its Notification No. 6587 (F. No. 187/1/86-ITA-I) dt. 6th February, 1986 :
The officers mentioned in Cols. 3, 4 and 5 shall exercise jurisdiction in respect of persons as specified in Col. 2 against SI. Nos. 1 and 2.
Sl. Persons Dy.CIT CIT(A) CIT
No.
1. Foreign companies/ Dy.CIT CIT (A) CIT
Concerns /Joint ventures Spl. Dehradun Meerut
which are engaged by the Range-I
Oil & Natural Gas Dehradun
Corporation Ltd., their sub- U.P.
contractors and assignees
for the purpose of
rendering industrial/
commercial works
including technical or other
services, royalty, etc., in
relation to its operations at
various places in India or
in relation to its offshore
operations in accordance
with the agreement/work
orders, etc., between ONGC
Ltd. and such foreign
companies/ concerns/joint
ventures/sub-contractors/
assignees, etc.
10 ITA No.2100/Del./2016
ITA No.2101/Del./2016
2. Employees of non- Dy.CIT CIT (A) CIT
resident companies/ Spl. Dehradun Meerut
concerns including Range-I
employees of the non- Dehradun
resident, affiliates and sub- U.P.
co tractors of U. P. such
on-resident companies/
concerns which are
engaged mainly by the Oil
& Natural Gas Corpn. Ltd.
for the purpose of
rendering industrial/
commercial works,
including technical or
other services, royalty etc.
in relation to its operations
at various places in India
or in relation to its
offshore operations in
accordance with the
agreement between ONGC
Ltd. and such non-resident
companies/ concerns/sub-
contractors/assignees/joint
ventures, etc.
This notification shall take effect from 1st February, 1994."
11. Bare perusal of Notification (supra) goes to prove that Deputy CIT, Special Range 1, Dehradun, UP only has the jurisdiction for assessment under the Act in case of assessee who is employee of non-resident company i.e. Hyundai Heavy Industries Co. Ltd..
12. First of all, notice u/s 148 dated 28.03.2012, available at page 37 of the paper book, was issued to the assessee at address i.e. Flat No.2, 4th Floor, Suraj Apartmets, 71, B.D. Road, Mumbai-26 which was received back unserved as per postal report, available at 11 ITA No.2100/Del./2016 ITA No.2101/Del./2016 pages 38 & 39 of the paper book with the remarks "left". Assessee had filed return of income for AY 2005-06 on 26.09.2005 and notice dated 28.03.2012 issued u/s 148 of the Act was returned by the postal authorities with remarks "left" whereas limitation for issuance of the notice u/s 148 of the Act expires on 31.03.2012 u/s 149 of the Act. So, notice issued u/s 148 is not a valid notice for reopening.
13. Furthermore notice dated 25.10.2012 issued u/s 142 (1) was handed over to landlord of the assessee who has further handed over the same to Hyundai Heavy Industries Co. Ltd., employer of the assessee on 12.11.2012 who has intimated on 03.12.2012 to ITO, Mumbai that assessee was on deputation with HHI, Mumbai as liaison officer from 2004 to December 2007, thus permanently left India. Thereafter, ADIT, International Taxation, Dehradun (AO) issued the notice dated 05.03.2013 u/s 142 (1) which was served upon the assessee.
14. Despite the fact that the AO has been duly intimated by the counsel for assessee that serve of notice u/s 148 of the Act has never been effected on the assessee, the AO proceeded to pass the assessment order u/s 144 of the Act. Furthermore, no order u/s 127 of the Act was passed to transfer the case from Mumbai to Dehradun. Rather on the basis of intimation given by the landlord 12 ITA No.2100/Del./2016 ITA No.2101/Del./2016 of the assessee, AO suo motu transferred the file to AO, Dehradun who has no power. When it is undisputed fact on record that notice u/s 148 was issued which was though not served upon the assessee by the ITO, Mumbai and assessment has been completed by ITO, Dehradun without passing order by the higher revenue authorities u/s 127 of the Act, assessment orders are not sustainable in the eyes of law as two ITOs cannot have the jurisdiction to make assessment.
15. Under section 2(71) of the Act, AO having jurisdiction can only assess or reassess any escaped assessment. Whereas, in the present case, reopening has been initiated by AO, Mumbai having no jurisdiction by issuing the notice u/s 148 of the Act which has never been served upon the assessee within the period of limitation, so the notice u/s 148 of the Act is no notice within the meaning of section 148 (1) of the Act.
16. Hon'ble Supreme Court in case cited as CIT, Gujarat - II vs. Kurban Hussain Ibrahimji Mithiborwala - 82 ITR 821 (SC) while deciding the identical issue as to a valid notice for reopening held that in case notice issued to the assessee is invalid for any reason, the entire proceedings taken by him would become void for want of jurisdiction. But, in this case, notice u/s 148 of the Act has never been issued by the AO rather notice issued u/s 148 by the 13 ITA No.2100/Del./2016 ITA No.2101/Del./2016 AO, Mumbai was never served upon the assessee nor he has any such jurisdiction to reopen the assessment. So, the entire reopening proceedings as well as assessment are not sustainable.
18. Coordinate Bench of the Tribunal in case cited as ITO vs. Naseman Farms (P.) Ltd. - (2011) 45 SOT 99 (Delhi)(URO) also dealt with the identical issue in which reassessment notice was issued by ITO, Agra who was having no jurisdiction and assessment was made by AO, Dehradun and held the same to be void ab initio and quashed the assessment. The operative part of the order is reproduced as under :-
"Section 2(7 A), read with sections 148, 120 and 147 of the Income-tax Act, 1961 - Assessing Officer - Meaning of - Assessment year 2001-02 - Assessing Officer completed assessment of assessee-company - Subsequently, on basis of an enquiry conducted by investigation wing of Income-tax department Assessing Officer at Agra issued a notice under section 148 - On appeal, Commissioner (Appeals) observed, inter alia, that assessee was registered with RoC, Delhi, and its registered office was at Uttam Nagar, Delhi; that assessee had filed its tax return for assessment years 1998-99 to 2000-01 at Delhi; and that this showed that reassessment notice issued from Agra was without any jurisdiction and, accordingly, he annulled reassessment proceedings - Whether it is only an Assessing Officer within meaning of section 2(7 A) who can assess or reassess any escaped income of an assessee under section 147 - Held, yes - Whether since Assessing Officer at Agra not being Assessing Officer qua assessee, as above, he could not have assessed or reassessed any escaped income of assessee for year under consideration under section 147 and he could not have served assessee with a notice under section 148 for 14 ITA No.2100/Del./2016 ITA No.2101/Del./2016 year under consideration and, hence, impugned order could not be found fault with at all - Held, yes Section 29288 of the Income-tax Act, 1961 - Notice deemed to be valid in certain circumstances - Assessment year 2001-02 - Whether section 292BB does not cure jurisdictional defect in notice - Held, yes - Whether section 292BB is applicable with effect from 1- 4-2008 and it does not apply to year under consideration, i.e., assessment year 2001-02 - Held, yes
- Whether section 292BB does not lay down that even where a notice is void ab initio for want of jurisdiction, such a notice shall still be deemed to have been duly served on an assessee in accordance with provisions of Act - Held, yes"
19. Hon'ble jurisdictional High Court in case cited as CIT vs. Smt. Anjali Dua - (2008) 174 taxman 72 (Delhi) also decided the identical issue in favour of the assessee by holding as under :-
"Section 124 of the Income-tax Act, 1961 - Assessing Officer - Jurisdiction of - Assessment year 1996-97 - Assessing Officer, Ludhiana had issued a notice to assessee under section 148 on 28-3-2003 - On appeal, assessee contended that said notice was without jurisdiction inasmuch as she had shifted from Ludhiana to New Delhi in July, 1997 - Revenue, on other hand, contended that notice pertained to assessment year 1996-97, which related to a period when assessee was residing at Ludhiana - Tribunal found that assessee had placed sufficient material on record to show that as early as in September, 1997, it had been brought to notice of authorities at Ludhiana that assessee had shifted her residence from Ludhiana to New Delhi; that letters exchanged between ITOs at Ludhiana and New Delhi clearly indicated that all cases and records with regard to assessment and returns filed in Ludhiana by assessee were sought to be transferred by her and ITO at Ludhiana and New Delhi had no objection to such transfer - Tribunal, therefore, held that after said transfer, it was only revenue authorities 15 ITA No.2100/Del./2016 ITA No.2101/Del./2016 at New Delhi who had jurisdiction over assessee's case and were competent to issue a notice in terms of section 148 - Whether order of Tribunal was justified - Held, yes"
20. Hon'ble High Court of Calcutta in case cited as Smt. Smriti Kedia vs, UOI & Ors. - (2012) 250 CTR (Cal) 221 also decided the identical issue in favour of the assessee by holding as under:-
"It is evident that the department in its affidavit in opposition has not denied the fact that all along the petitioner was assessed at Kolkata. That apart, there is nothing on record to show that pursuant to an order under s. 127, the assessment records of the petitioner were transferred either from Kolkata to New Delhi or from New Delhi to Kolkata. Therefore, unless records were validly transferred from Kolkata to New Delhi, the said respondent had no jurisdiction to issue notice under s. 148 for the assessment year in question. Hence, the impugned notice dated 28th March, 2006 under s. 148 issued by the AO is arbitrary, without jurisdiction and illegal. So far as the other impugned notices are concerned, since it is evident from the notice dated 13th November, 2006 issued by the respondent no.3, that it was pursuant to the notice under s. 148, the same is also without jurisdiction and illegal. The notice under s. 142 of the Act dated 20th November, 2006 issued by the respondent no.3, is also without jurisdiction and illegal as evidently it was consequent to the notice under s. 148, it being obvious from the "requisitions" appended to the said notice that the petitioner was intimated that "in response to notice u/s s. 148, you have not yet filed your return of income". So far as the notice under s. 143(2) dated 7th December, 2006 issued by the respondent no.3 is concerned, since it was enclosed along with the notice dated 7th December, 2006 with regard to the assessment proceedings under s. 147 initiated by the respondent no.2 for the said assessment year, that too, is arbitrary and illegal. Therefore, the notices dated 13th November, 16 ITA No.2100/Del./2016 ITA No.2101/Del./2016 2006, 20th November, 2006, 7th December, 2006 and the other notice dated 7th December, 2006, all issued by the respondent no.3 are set aside and quashed."
21. In view of what has been discussed above, we are of the considered view that firstly, no notice u/s 148 of the Act along with reasons for reopening was ever served upon the assessee; that the AO, Mumbai who has issued the notice u/s 148 was not having jurisdiction as only AO, Dehradun was having the jurisdiction as per Notification (supra); that even the notice issued by AO, Mumbai was never served upon the assessee and as such, the entire reopening proceedings and consequent reassessment is void ab initio and as such liable to be quashed. So, without entering into the merits of the case, we hereby quash the assessment orders passed by AO and confirmed by ld. CIT (A) for AYs 2005-06 and 2006-07. Consequently, both the appeals filed by the assessee are allowed.
Order pronounced in open court on this 25th day of May, 2018.
Sd/- sd/-
(G.D. AGRAWAL) (KULDIP SINGH)
PRESIDENT JUDICIAL MEMBER
Dated the 25TH day of May, 2018
TS
17 ITA No.2100/Del./2016
ITA No.2101/Del./2016
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-2, Noida.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.