Income Tax Appellate Tribunal - Amritsar
Sh. Pawan Kumar Sharma, Hoshiarpur vs The Income-Tax Officer, Hoshiarpur on 24 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER
AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER
ITA No.561 (Asr)/2014
Assessment year: 2010-11
PAN : ABRPS-3527J
Pawan Kumar Sharma, Vs. Income Tax Officer,
Prop. Kanahaya Industries, Ward-III,
55/12 krishna Nagar, Hoshiarpur
Hoshiarpur
(Appellant) (Respondent)
Appellant by : Sh. J. S. Bhasin( Ld. Adv.)
Respondent by: Sh. Rahul Dhawan(Ld. D.R.)
Date of hearing : 25/10/2016
Date of pronouncement : 24/01/2017
ORDER
PER N. K. CHOUDHRY (JM):
This appeal has been filed by the assessee, feeling aggrieved against the order passed by the Ld. CIT (A), Jalandhar u/s. 250(6) of the I.T. Act.
2. The assessee has raised the following grounds of appeal.
"(i) That the Ld. CIT(A), in the given facts of the case, has grossly erred in upholding the validity assessment made on the basis of material illegally collected by ITO Una, during so called survey conducted by him at assessee's premises, when he never had jurisdiction over this case neither in past nor in future.
(ii) That the Ld. CIT(A) failed to appreciate the assessee's argument in correct perspective that the dispute raised was not on the jurisdiction of ITO Hoshiarpur, but of the ITO Una, whom the jurisdiction was never transferred by due process of law, to conduct survey at assessee's premises.
(iii) That without prejudice to outcome of above legal grounds, the Ld. CIT(A) erred in law and on facts to uphold the addition of Rs.24,02513/- made by the Ld. ITO u/s 69, towards unexplained investment on construction of factory building, by relying upon unproved entries made in 'diaries' impounded in survey.2 ITA No.561/Asr/2016
Asst. Year: 2010-11
(iv) That likewise, the Ld.CIT(A), while granting substantial relief out of addition made towards the alleged discrepancy in valuation of stocks held/found during survey, erred in sustaining addition of Rs. 2,75,114/- de hors the facts and material on record.
(v) That the ITO having accepted the trading results, as also the books of account, the above additions were unwarranted and illegal and hence, un- sustainable.
(vi) That alternatively, when the assessee was neither found nor held to have engaged in any other business activity but for running the industrial unit set up at Una, the impugned income purportedly invested in building and stocks, ought to have been allowed deduction u/s 80IC.
(vii) That the addition of interest income of Rs.22194/-, made on account of mismatch with Form No. 26, has been wrongly sustained by the Ld.CIT(A).
(viii) That the order of the authorities below are incorrect in facts and on law, to the extent disputed hereinabove.
3. The brief facts of the case are that the Assessee being an individual has filed his return of income for the year under consideration on 26.09.2010 declaring therein an income of Rs.2,45,750/- after claiming deduction under section 80IC of the Act to the extent of Rs.27,94,269/-. It has been gathered from the facts of the case that a survey operation under section 133A of the Act was conducted by the Income Tax Officer, Una at the business premises of the assessee on 16.12.2009. During the course of survey operation, some discrepancies in stock and cash were noticed by the survey team. The stock lying at the business premises of the assessee was physically verified and inventory of the same was also prepared by the survey team. As per trading account furnished by the assessee at the time of survey, there was a stock valuing Rs.2,04,32,011/- as per books of account whereas on physical verification, the stock was found to the tune of Rs.2,68,92,255/-. It means, on physical verification excess stock worth Rs.64,60,244/- was found on the date of survey. Similarly, the cash as per books of account was noticed by the survey team at Rs.9,21,776/- whereas no cash was found on physical 3 ITA No.561/Asr/2016 Asst. Year: 2010-11 verification. In addition to this, some diaries/note books were also found during the course of survey in which expenses relating to construction of factory cum office building of the assessee were noticed. During the course of assessment proceedings, the Assessing Officer confronted the discrepancies noticed in stock and cash to the assessee and also enquired about the source of expenses on construction as noted in the diaries impounded during the course of survey. In response thereto, the assessee furnished detailed reply in respect of each issue, however, the Assessing Officer partly accepted the explanation of the assessee with regard to discrepancy in stock but has not accepted the explanation of the assessee with regard to discrepancy in cash. The Assessing Officer has also not accepted the explanation offered by the assessee with regard to sources of expenses on construction which have been noted in the diaries. The assessment in the case of the assessee was, therefore, completed by the Assessing Officer under section 143(3) of the Act vide order dated 28.03.2013 at an assessed income of Rs.52,56,525/-. While completing the assessment in this case, the Assessing Officer has made the following additions to the returned income of the assessee:-
(i) Addition on account of discrepancy in cash Rs.9,21,776/-
(ii) Addition on account of alleged unaccounted expenses incurred on the construction of building as noted in diaries Rs.24,02,513/-
(iii) Addition on account of discrepancy in stock Rs.16,64,294/-
(iv) Addition on account of discrepancies noticed in
interest income shown by the assessee and as
appearing in 26AS statement Rs.22,194/-
The Assessing officer finally determined additions of Rs.9, 21,776/- on account of discrepancy in cash, Rs.24,02,513/- on 4 ITA No.561/Asr/2016 Asst. Year: 2010-11 account of alleged unaccounted expenses on construction of building as noted in diaries, Rs.16,64,294/- on account of discrepancy in stock and Rs.22,194/- on account of discrepancies noticed in interest income.
4. Feeling aggrieved by the assessment order passed by the Assessing Officer, the assessee preferred the first appeal before the Ld. CIT, who partly allowed deletion of Rs. 9,21,776 on account of discrepancy in cash and further reducing the amount of Rs. 16,64,244 on account of discrepancy in stock to the tune of Rs. 2,75,114 while affirming the rest of the additions made by the Assessing Officer.
5. Feeling aggrieved by the order passed by the Ld. CIT, the assessee preferred the instant appeal on the groundsmentioned in para no. 2 of the appeal.
6. The Assessee in addition to the already raised grounds of appeal, also raised two additional grounds of appeal by filing an application dated 16th February, 2016 which are as under:
(i)"That in the light of CIT(A)'s twin findings in para5.1 of his order, that (i) the ITO Hoshiarpur-3 had valid jurisdiction in assessee's case at the time of framing assessment and also that (ii) the dispute regarding jurisdiction over the case had been finally settled by the CIT, Shimla (Vide his office letterer No. 3742 dt.
11.12.2012), then the statutory notice issued u/s 143(3) on 20.09.2011 by ITO-3 Hoshiarpur, was without 5 ITA No.561/Asr/2016 Asst. Year: 2010-11 jurisdiction and therefore, the consequential assessment order passed by him was invalid.
(ii)That the Ld. CIT(A)'s further finding in para 5.1 that that there was no infirmity in completing assessment, based on documents impounded by ITO Una during survey as per his territorial jurisdiction, also reaffirms that as on 20.09.2011, when the notice u/s. 143(2) was issued by ITO, Hoshiarpur, the jurisdiction was vested with ITO Una, till it was transferred by CIT Shimla on 11.11.2011."
7. In support of additional grounds , it was argued by the Ld. Counsel of the assessee that both the grounds are legal grounds and arise out the facts and material already available on record before the Hon'ble Bench, and in the light of Hon'ble Supreme Court decision in National Thermal Power Co. Ltd. Vs. CIT(1998) 229 ITR 383 it was further argued by the Ld. Assessee that the assessee is entitled to raise the additional grounds even for the first time before the Bench and it was further submitted that the above grounds could not be raised earlier in as much, the Assessee remained focused only on the point that ITO Una was having no jurisdiction of the assessee's case and therefore could not validly impound any documents from his premises u/s. 133A and therefore, such illegal seizure of documents could not come to the aid of Assessing Officer for making any addition. Now while preparing the appeal, when the order of the authorities below specially of the Ld. CIT(A), have been revisited carefully, it transpires that notice issued by ITO, Hoshiarpur , u/s. 143(2) was without jurisdiction therefore, the assessee is entitled to make the 6 ITA No.561/Asr/2016 Asst. Year: 2010-11 instant application because there was no malafide in not raising the above additional grounds of appeal in regular memos.
The Ld. AR also argued at length on the merit of the case however we feel appropriate to decide the legal issues first therefore, restraining ourselves from touching the merits of the case.
8. On the contrary, the Ld. DR emphasized that the additional grounds have been raised by the appellant first time only at the fag end of his appeal, are not in consonance with law because the controversy with regard to the jurisdiction had been settled by the Ld. CIT(A) Shimla and thereafter only the Assessing Officer has passed the assessment order while giving ample opportunities to the Assessee. The Ld. also replied the contentions raised by the Assessee on merits of the case, however first we are deciding the legal issue therefore are not considering at this stage.
9. We have gone through with the facts and circumstances of the case and also rival submissions of the parties, it is true that the Assessee never raised these grounds qua jurisdiction of Assessing Officer, Hoshiarpur, either at the initial proceedings or at appellate stage, however because these are legal and technical issues goes to the roots of the case therefore we feel it appropriate to allow to raise additional grounds in addition to already raised grounds of appeal. As the Assessee has raised the legal issues therefore it would be proper to decide the legal issues first without touching the merits of the case.
7 ITA No.561/Asr/2016Asst. Year: 2010-11 We feel it appropriate to mention sequences of date and events qua jurisdiction of the Assessing Officer.
Date Event
14.12.2009 Survey conducted by ITO Una, at Assessee's
premises
26.09.2010 E-filing of return by assessee
15.09.2011 143(2) notice issued by ITO Una
20.09.2011 143(2) notice issued by ITO Hoshiarpur
14.12.2012 ITO Una informs ITO Hoshiarpur that asstt.
Proceedings pending with his office and matter of jurisdiction was pending with CIT, Shimla.
20.12.2012 ITO Una informs ITO Hoshiarpur that jurisdiction of this case transferred to ITO Hoshiarpur by CIT, Shimla vide order No. 3742 dt. 11.12.2012 28.03.2013 ITO Hoshiarpur Passed order u/s. 143(3) The Assessee filed his return of income through E-filing on 26.09.2010 declaring an income of Rs. 245750/- after claiming deduction under section 80IC of the Income Tax Act, 1961, amounting to Rs. 27,94,269/-.The return was processed u/s 143(1) on 24.05.2011. Subsequently, the case was selected for scrutiny under CASS program of CBDT. Accordingly notice under 143(2) of the income tax act was issued on 20.09.2011 which was duly served upon the assessee on the 21.09.2011. There after notices U/s 143(2)/142(1) along with detailed questionnaire were issued on 10.11.2011 which were duly served upon the assessee on 11.11.2011. As change of incumbent notices U/s 143 (2)/142(1) were issued on 21.11.2012. The ITO Una, vide his letter dated 14.12.2012 informed that assessment 8 ITA No.561/Asr/2016 Asst. Year: 2010-11 proceedings are pending with his office being a survey case and in response to the notices the assessee claimed that jurisdiction over his case lies with ITO Ward-3, Hoshiarpur as he is residing at Hoshiarpur. He further informed that the matter of jurisdiction of the assessee is pending with the Commissioner of Income Tax, Shimla. On 20.12.2012 it was intimated by the ITO Una through fax that the issue of jurisdiction has been decided and CIT, Shimla has given his approval to transfer this case from ITO Una to ITO Ward-3, Hoshiarpur vide his office letter no. 3742 dated 11.12.2012. In response to the statutory notices Sh. P.K. Khanna C.A. authorized representative of the assessee attended the proceedings from time to time and filed written submission/information as called for.
As it reflects from the sequences that vide dated. 15th September, 2011 the notice u/s. 143(2) was issued by the ITO Una, and vide order dated 20th September, 2011 notice u/s. 143 was also issued by the ITO Hoshiarpur, where the assessee was filing the income tax return and vide order dated 11th December, 2012 passed by Ld. CIT, Shimla vide order no. 3742, the jurisdiction of the instant case of the assessee was finally transferred to the ITO Hoshiarpur and in pursuance to that , ITO Hoshiarpur on dated 28th March, 2013 passed the assessment order which was subsequently challenged before the Ld. CIT, as well as before this Bench.
It is undisputed fact that both the ITO's issued proper statutory notices u/s. 143(2) within time as prescribed u/s. 143(2) of the income I.T. Act, however due to controversy of the jurisdictions as the different ITO's initiated the proceedings under the Income Tax Act qua same subject matter, therefore, the controversy was cropped up which 9 ITA No.561/Asr/2016 Asst. Year: 2010-11 was finally settled by the Ld. CIT, Shimla on dated 11th December, 2012. From the order passed by the Ld. CIT, Shimla, it is clear that the ITO Hoshiarpur was having jurisdiction to pass assessment order, however there was confusion in the mind of the assessee as well as Income Tax Authorities with regard to the jurisdiction because of the issuance of notice u/s. 143(2) by two different Assessing Officers of single subjective matter in our considered opinion after clarification of the jurisdiction by the Ld. CIT Shimla, the Assessing Officer Hoshiarpur was supposed to initiate fresh proceedings while issuing fresh statutory notice , on vesting/clarification of the jurisdiction.
10. We have given our thoughtful consideration and we feel it appropriate that it was a procedural confusion/lapses and it is a clear fact the Assessee never challenged the jurisdiction at Hoshiarpur and in fact, the Assessee reaffirmed before the Assessing Officer (UNO) that Assessment Jurisdiction vest only with Hoshiarpur because the Assessee had filed Income Tax Return of the previous financial year at Hoshiarpur only because he reside there.
It is not the case of the Assessee that the Assessing Officer Hoshiarpur never issued any Statutory Notice for assessment proceedings but the Assessee contention is that at the time of issuing the Statutory Notice , the Assessing Officer , Hoshiarpur had no jurisdiction to issue the notice therefore assessment order passed by Assessing Officer , Hoshiarpur is based on the Notice dated 20-09- 2011 issued u/s 143(2) bad in law and not sustainable and in consequently order passed by the ld CIT also liable to be quashed.
10 ITA No.561/Asr/2016Asst. Year: 2010-11 We are not satisfied by the grounds and contentions raised by the Assessee to quash the assessment proceeding in toto because the Assessee participated in the assessment proceedings and also filed his reply and never challenged the jurisdiction of Hoshiarpur, however considering the peculiar facts and circumstances that there was confusion qua jurisdiction of assessment proceedings in the mind of Assessee as well as of Department therefore it would be proper and in the interests of justice and fair play to afford reasonable opportunities to the parties of being heard and to defend their cases properly , hence we remand the case to the file of Assessing Officer to frame the assessment order de-novo after giving proper and reasonable opportunities to the parties.
11. In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open Court on 24.01.2017.
Sd/- Sd/-
(T. S. KAPOOR) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 24 .01.2017.
/GP/ Sr.Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By Order