Income Tax Appellate Tribunal - Amritsar
Shri Udham Singh (Deceased) (Through ... vs Income Tax Officer Ward -4, Hoshiarpur on 26 July, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR (SMC)
BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER
I.T.A. No. 310/Asr/2018
Assessment Year: 2009-10
Udham Singh (Deceased) vs. The Income Tax Officer,
s/o Lt. Sh. Kesra Singh Ward-4,
(through Legal Heir) Hoshiarpur
Sh. Nazar Singh, VPO Nasrala,
Teh. & Distt. Hoshiarpur
[PAN: CARPK 0699C]
(Appellant) (Respondent)
Appellant by : Sh. Sudarshan Kapoor & J.P. Bhatia (Adv.)
Respondent by: Sh. Charan Dass (D.R.)
Date of Hearing: 29.04.2019
Date of Pronouncement: 26.07.2019
ORDER
Per Sanjay Arora, AM:
This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-1, Jalandhar ('CIT(A)' for short) dated 01.02.2018, dismissing the assessee's appeal contesting his assessment u/s. 144 r/w s. 147 of the Income Tax Act, 1961 ('the Act' hereinafter) dated 28.9.2016 for the Assessment Year (AY) 2009-10.
2.1 The appeal raises both legal and factual issues. Opening the arguments for and on behalf of the assessee, it was submitted by the assessee's counsel, Sh. Kapoor, that both the 'issue' and 'service' of the notice u/s. 148 dated 23.3.2016 are not proper, i.e., as per law. The said notice (paper-book/PB pg. 4); the assessee 2 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO having passed away on 27.6.2009, is on his legal heir, without specifying the said heir by name. Late Sh. Udham Singh had two sons, i.e., Sh. Nazar Singh Khullar, resident of UK, who in fact appeared before the Assessing Officer (AO) in response to the notice u/s. 133(6), filing a reply dated 15.02.2016 (PB pg. 3), and Sh. Prabhjeet Singh Khullar. The notice, however, is not to any of them, but addressed to his 'legal heir'. Two, the notice has been served through an affixture order dated 23.3.2016 (PB pg. 6), i.e., the same date on which the notice u/s. 148 stands issued. How could it be in-as-much as the service through affixture could be made only where it cannot be effected in the ordinary way. In fact, the said notice, also sent per registered post, was returned by the postal authorities with the postal remarks dated 29.3.2016, on 31.3.2016 (PB pg. 5). There has, accordingly, been no valid service. In fact, Sh. Nazar Singh Khullar, as his letter dated 15.02.2016 to the AO shows, had even given his email address for any communication. The AO ought to have, therefore, sent him the notice through email. Notice on a dead person is not valid. Reference was made by him to a recent decision by the Tribunal in Om Parkash Sharma v. ITO (in ITA No. 500/Asr/2017, dated 09.10.2018/PB pgs. 39-45), setting aside the assessment under such circumstances.
2.2 It was, at this stage, explained by the Bench that the pleas being advanced raise a number of legal issues, each of which would require being suitably addressed, and it cannot be said to be either a covered or a cut and dried matter. The jurisdiction to assess u/s. 147 is assumed on the basis of the issue of notice u/s. 148, and not its' service, and which could therefore be served even subsequently (R.K. Upadhyaya v. Shamabhai P. Patel [1987] 166 ITR 163 (SC); Jai Hanuman Trading Co. v. CIT [1977] 110 ITR 36 (P&H)(FB); CIT v. Sheo Kumari Devi [1986] 157 ITR 13 (Patna)(FB)). The issue of the said notice in the instant case is on the legal heir (LH) of the deceased assessee, who substitutes him as his 3 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO representative assessee u/s. 159, irrespective of his name. The same would therefore be invalid only if there was no surviving legal representative (LR), while the assessee admittedly has two sons as his LRs. How could the issue of notice, thus, be regard as invalid? Notice to a person without mentioning his status, or mentioning it incorrectly, has been regarded the Hon'ble Courts, as in Maharaja of Patiala v. CIT [1943] 11 ITR 202 (Bom), as not invalidating the proceedings where the noticee has correctly understood the purport of the notice. Reference in this context may also be drawn to the decisions, inter alia, in CIT v. Jai Parkash Singh [1996] 219 ITR 737 (SC) (noticing with approval the decision in Maharaja of Patiala (supra)) and Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC). Assessment in the name of the deceased person, where the legal representative had been put to notice, was held to be a clerical mistake in Swarn Kanta v. CIT [1989] 176 ITR 291 (P&H) (also refer s. 292B; Rakesh Gupta v. ITO
- ITA No. 222/Asr/2016, dated 31/1/2019).
Service is a matter of procedure and, further, a question of fact, its' purport being to communicate to the noticee that proceedings, as specified in the notice, against him stand initiated, extending him an opportunity of hearing (CST v. Subash & Co., in CA No. 1374 of 2003, dated 17/2/2003, by the Apex Court). Lack of notice, as explained in Estate of Late Rangalal Jajodia (supra), noted with approval in Jai Prakash Singh (supra), would not annul the proceedings but render the same procedurally infirm, i.e., a curable defect, so that the proceedings would have to be restored to the stage at which the irregularity had occurred, even as explained by the Apex Court per the decisions by its' larger benches, as in Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC) and Supdt., Central Excise v. Dr. Pratap Rai [1978] 114 ITR 231 (SC). Where the notice remained undisposed, it was explained in Guduthur Bros. (supra), it did not cease to be operative. The proceedings, lawfully initiated, shall travel to the point where the illegality 4 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO supervened. The ITO had the jurisdiction to continue the proceedings from that stage. Further, as explained in Dr. Pratap Rai (supra), whenever an order is struck down as invalid for being in violation of the principles of natural justice there is no final decision of the cause and fresh proceedings are left open. All that is done is that the order assailed by virtue of its inherent defect is vacated but the proceedings are not terminated. The question of service would thus become relevant only where the non-service results in the proceedings becoming time-barred or otherwise had caused a prejudice in-as-much as proper opportunity of hearing is an essential ingredient of the judicial process, a principle of natural justice. The time limit for the completion of assessment u/s. 147 is with reference to the date of its' service and not its' issue (s. 153(2)) (also see: Prakash Electric Co. v. ITO [2008] 118 TTJ 539 (Bang); Asst. CIT v. Khosla International (in ITA No. 307/Asr/2016, dated 28/3/2019); Jaspal Singh v. ITO (in ITA No. 445/Asr/2016, dated 08/5/2019)). There is further no time limit for service, so that a claim of prejudice, where accepted, would cause the matter to be set aside for enabling the assessee, acting through his LR/s, to present his case, as clarified by the Hon'ble jurisdictional High Court in CIT v. Jasbir Singh [2014] 103 DTR 427 (P&H). This is also in conformity with the first principles in-as-much as the jurisdiction to assess u/s. 147 is assumed on the basis of a valid issue of notice u/s. 148(1), and not its' service, and the fact that, in case of irregularity, the proceedings have to be restored, as explained, to the stage where the regularity had occurred (also see CIT v. Roshan Lal [1982] 134 ITR 145 (Del)).
Notice u/s. 148(1) was in the instant case served at the same address at which the earlier notice u/s. 133(6), duly responded, had been, and at which, subsequently, the assessment order was sent. The subsequent appeals by the assessee, through his legal representative, Sh. Nazar Singh, mention the same address. These facts, unrebutted, stand stated by the ld. CIT(A) in the impugned 5 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO order. In fact, that the same is the correct address is also borne out by the letter dated 15/2/2016 (furnished before the Assessing Officer (AO) on 25/2/2016) of Sh. Nazar Singh, with it's contents (pages, other than page 1 thereof, have been not, for reasons not specified, made part of the record) making it clear that he is shortly leaving India (which he does on 07/3/2016). The service through affixture is, under the circumstances, appropriate.
2.3 Continuing further, in the facts of the present case, Sh. Nazar Singh, being a non-resident and aware of the proceedings and, admittedly, unable to furnish the relevant information qua the deposits in the assessee's bank account during the year, ought to have supplied the name and address of the person, preferably accompanied by an acceptance by such person, who, in his absence, could be regarded as his agent. He, in fact, ought to have similarly; rather, by way of an affidavit, provided the name and address of the other legal heir/s of the Lt. Sh. Udham Singh, his father.
2.4 It was at this stage submitted by Sh. Kapoor that he may be heard on the merits of the quantum addition as well, on which he had (in his view) a good case. So, however, if the Bench is not satisfied, he may be allowed some time to prepare on the legal aspects of the case. This was accepted, making it clear that the matter would be kept part-heard, and he allowed a limited, albeit reasonable, time for the same. The hearing was, accordingly, proceeded with, and the order reserved after hearing the parties.
3. Before proceeding to examine the assessee's case on quantum, it is deemed proper to consider the assessee's reliance on Om Prakash Sharma (supra). This is as where covered thereby, even as indicated to the contrary during hearing itself, there would be no need to discuss the merits of the quantum addition. In the said 6 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO case, the decision turned on the service of the notice u/s. 143(2), which was validly impugned. The same was not a case of an assessment u/s. 147, where the jurisdiction gets assumed on the basis of valid issue of notice u/s. 148(1), as opposed to a valid service of notice u/s. 143(2) in case an assessment without reference to s. 147 (refer proviso to s. 143(2)(ii)). The said decision is thus distinguishable on facts as well as in law. Further, the Hon'ble jurisdictional High Court in VRA Cotton Mills (P.) Ltd. v. UOI [2013] 359 ITR 495 (P&H) has held that the expression 'served' in proviso to sec. 143(2) is to be construed as 'issued'. The order in Om Prakash Sharma (supra) is without noticing, much less considering, the binding judicial precedents, including VRA Cotton Mills (P.) Ltd. (supra), cited hereinbefore (refer para 2.2 of this order).
4.1 The assessee, found to have cash deposits at a total of Rs.26,75,600 in his bank account during the relevant year, was, on being required to explain the same, found to be unable to satisfactorily explain the same to the extent of Rs.18,75,600. The reduction in the amount of addition (i.e., with reference to the total cash deposit at Rs.26.756 lacs), is on account of the cash withdrawn from the bank account, so that the same was regarded as re-deposited to that extent. The detail of the cash deposits in and withdrawals from bank, tabulated at page 38 of the PB, is as under: (Amount in Rs.) CASH FLOW STATEMENT Date Particulars Debit Credit Balance 22.08.2007 By sale of property 140000 140000 04.02.2008 By sale of property 380000 520000 15.04.2008 Withdrawn from bank 600000 1120000 13.05.2008 Withdrawn from bank 90000 1210000 7 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO 27.05.2008 Withdrawn from bank 10000 1220000 04.07.2008 Deposited in bank account 850000 370000 08.07.2008 By sale of land 1500000 1870000 08.07.2008 Deposited in bank account 950000 920000 09.07.2008 Deposited in bank account 770000 150000 06.09.2008 Deposited in bank account 40000 110000 04.12.2008 Deposited in bank account 38000 72000 13.01.2009 Deposited in bank account 13000 59000 09.03.2009 Deposited in bank account 14600 44400 2720000 2675600 There is, thus, it was explained by Sh. Kapoor, adverting to PB pg. 38, no shortfall in cash on any date, even as the sale deed dated 08/7/2008 clearly states of the cash having been received before the execution of the sale deed. The cash withdrawn from bank (Rs. 7 lacs), as well as that realized on the sale of lands (Rs. 5.20 lacs), was subject to temporary lending, deposited in bank on being received back.
4.2 The assessee has explained the source of the cash with him, as under:
(a) sale of 7 marle residential land - Rs.1,40,000 on 22.08.2007
(b) sale of 19 marle residential land - Rs.3,80,000 on 04.02.2008
(c) sale of agricultural land - Rs.15,00,000 on 08.7.2008 Each of the three sales is evidenced by a sale deed of the stated date (PB pgs. 22 -
37), even as no dispute qua the same has been raised by the Revenue, or is otherwise noticed. The sale of residential land on 22.8.2007 at Rs.1.40 lacs was not accepted as a valid source as the amount could not be expected to be deposited in his bank account by the assessee-payee after lapse of nearly a year. Similarly, the 8 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO sale of residential land on 04.02.2008 took place 5 months ago, with there being in fact further cash withdrawals (at Rs.7 lacs) after 04.02.2008 (i.e., up to 04.7.2008).
As regards the sale of agricultural land at Rs.15 lacs, the sale deed did not mention the date of receipt of the sale consideration, merely stating that it had been paid before that date. The assessee has in fact been already allowed credit for Rs.8 lacs (Rs. 26.756 lacs - Rs. 18.756 lacs) against the cash withdrawals. This explains the Revenue's case.
4.3 The assessee is, as stated, an agriculturist, with no other known source of income. The AO ought to have, therefore, reasonably estimated the assessee's agricultural income, i.e., on the basis of his land-holding, as well as that under cultivation. This would have, firstly, confirmed him to be an agriculturist indeed. Further, apart from providing a reasonable basis for meeting the house- hold/personal expenditure - which cannot be overlooked as only the surplus could be deposited in bank, is also relevant for determining his tax liability as the same gets included for rate purposes. Be that as it may. The assessee not maintaining any accounts, it may well be that the amounts withdrawn had been used for personal/house-hold purposes, and were not available for redeposit. Why, loss or non-return of capital is a risk associated with lending - the stated explanation for the time lag, furnished before the Tribunal for the first time - and, this, despite the proceedings having been also remanded back at the first appellate stage. Credit for the amounts withdrawn, however, has already been allowed at Rs.8 lacs, and not disturbed in further appeal, even as the cash withdrawn, after 22.8.2007 - on which date the assessee has no cash balance, is at Rs.7 lacs only. If this amount (Rs. 7 lacs) is available for redeposit, so could arguably be the amounts received earlier. This is particularly so as all these sums have been received by the assessee as a POA holder of his two sons, i.e., as a trustee, so that he is accountable for the said 9 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO sums. There is - to the assessee's credit, nothing to show that the amount withdrawn, or otherwise received prior to 04.7.2008, has been used for any other purpose. Similarly, there is nothing to indicate that the amounts referable to the sale deeds, the stated source of cash with the assesse, belonging to his two sons, had been used or otherwise credit in respect thereof availed by the assessee or his two sons. In fact, as the letter dated 15/2/2016 by Sh. Nazar Singh reveals, it was only upon inquiry with his cousins (as to the source of the cash deposits by their father in his bank account), that the fact of sale of his sons's lands by him came to light. The withdrawals, as stated, could be for a temporary lending, though there is nothing on record to show this, as well as the extent of lending. It is in fact for this reason also that the assessee, who would be definitely having his own expenditure as well, that agricultural income assumes relevance. There is nothing to exhibit, or even a claim to that effect, of the assessee having disbursed the sale proceeds among his two sons. In fact, his sons visiting him, as Sh. Nazar Singh does (from 24.11.2015 to 07.03.2016), could presumably be giving some cash to the assesse, even as there is no contention to this effect.
4.4 Continuing further, examining the asseessee's cash flow statement, the source of cash, apart from the sale of lands, is that withdrawn from his bank account. The same bears all the transactions relating to the cash deposited in or withdrawn from bank. The purport of the fore-going is that though it is held, and only understandably so, that credit for the cash realized in August, 2007 and February, 2008 cannot be allowed in view of the time lag, the addition being for the peak credit in bank (of Rs. 18.756 lacs), credit for the same has effectively been allowed. The reason is that, though not stated (with the copy of the bank account - PB pgs. 46-47 being also not clear), the peak credit in bank should correspond to, in view of the detail of the cash deposits - the last of which is in March, 2009, and 10 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO withdrawals; there being no cash withdrawal during the year after 27/5/2008, and after which date the entire cash deposited during the year (Rs. 25.756 lacs) has been, March, 2009. In this regard, the first observation is that if the cash received in pursuance of the sale deed dated 08/7/2008 is, as stated therein, received prior thereto, i.e., on 04/7/2008, the addition for the unexplained cash deposits could not exceed Rs. 11.756 lacs (Rs. 25.756 lacs - Rs. 15 lacs), i.e., even if no credit is allowed for the cash withdrawn or realized earlier. The deposit of cash in minor sums (from September, 2008 to March, 2009), supports the assessee's claim of having temporarily lent the monies, depositing them as and when received back, though the amount involved is to the tune of Rs. 1 lac only. At the same time, the assessee's conduct of deposit of the sale proceeds of the sale dated 08/7/2008 immediately on receipt, and in full, indicates of him to be conscious of his obligations. The money realized, after all, belongs to his two sons, so that he is accountable to them for the same. The assessee's explanation for the time lag is of having temporarily lent the monies, so that the same were deposited on being received back. A person acutely aware of his obligations, would not normally part with the money held under trust, i.e., Rs. 5.20 lacs, realized on sale of lands during fy 2007-08 (corresponding to AY 2008-09), and which in fact strengthens the theory of cash lending, as there is no stated purpose of the cash withdrawal of Rs. 6 lacs in April, 2008, i.e., even if the cash withdrawal of Rs. 1 lac in May, 2008, is regarded as for personal/house-hold purposes. If this amount (Rs. 6 lacs) is added to that realized on sales (other than of 08/7/2008), i.e., Rs. 5.20 lacs, the total aggregates to Rs. 11.20 lacs, i.e., approximating the cash short-fall (unexplained cash deposit) of Rs. 11.756 lacs. Put differently, allowing credit for the sale monies (Rs. 20.20 lacs), and that withdrawn lump-sum on 13/5/2008 (Rs. 6 lacs), the shortfall is only to the extent of Rs. 0.556 lacs (Rs. 26.756 lacs - Rs. 26.20 lacs). The cash deposit/s can be said to be explained except, perhaps, to that extent.
11 ITA No. 310/Asr/2018 (AY 2009-10)Udham Singh (Deceased) v. ITO 4.5 On the balance, the assessee's case is not out of the ken of probability, and it may not be correct to dismiss the same as fanciful. A mathematical precision is, even otherwise, out of bounds in the facts and circumstances of the case. It needs to be borne in mind that the assessee - who only could explain the conduct of cash deposit and withdrawal in his bank account, is not alive. The stated explanation of temporary lending is being furnished only by and on behalf of the representative assessee's in a bid to explain the time lag. As afore-noted, it was only upon inquiry with his cousins by Sh. Nazar Singh (as to the source of the cash deposits by his father in his bank account), that the fact of sale of his son/s's lands by the latter came to light in February, 2016. What significance, then, one may ask, the charge of the explanation of the lending being unsubstantiated? The matter has to be, i.e., under the given facts and circumstances, necessarily considered holistically. There being no indication, as afore-stated, of utilization of the cash withdrawn by the assessee from his bank account in April/May, 2008, as also the sale proceeds of his sons' lands, the same can be regarded in explanation of the cash deposited in his bank account. As explained in Saroj Aggarwal v. CIT [1985] 156 ITR 497 (SC), the courts should, whenever possible, unless prevented by the express language of any section or compelling circumstances of any particular case, make a benevolent and justice-oriented inference. Facts must be viewed in the social milieu of a country; in their natural perspective, having regard to the compulsion of the circumstances of the case. Where it is possible to draw two inferences from the facts, and where there is no evidence of any dishonest or improper motive on the part of the assessee, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hypertechnical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered.
12 ITA No. 310/Asr/2018 (AY 2009-10)Udham Singh (Deceased) v. ITO I am, it may be clarified, also conscious that the amount/s realized on sale/s may have been higher than that disclosed in the sale deed/s, as is generally the case, and it is this money that may have found its' way in the assessee's bank account. Even so, no addition would be called for as the sale deeds for lands, other than the agricultural land, are in the preceding year. That apart, the amounts realized by the assessee are only in his capacity as a POA, so that no part thereof belongs to him for it to be regarded as his income. This in fact brings me to another aspect of the matter, also considered by the ld. CIT(A).
4.6 The ld. CIT(A) has also confirmed the addition on the ground that the assessee being a Power of Attorney holder of his sons, the lands sold were not capital assets in his hands. That is, the sale proceeds thereof represent a taxable receipt in his hands (para 9.8 of the impugned order). One wonders how? Being sold as a POA implies that the amount/s is realized by him as a trustee, for and on behalf of his two sons, of which he could though be regarded as an agent u/s. 163 of the Act. The only asset sold during the year is an agricultural land, so that, as it appears, the same is not a capital asset u/s. 2(14) of the Act. In fact, in that view of the matter, bank deposits to the extent of Rs. 20.20 lacs, i.e., the sale proceeds of the three listed assets, save that already paid over to his sons - of which there is no indication, is not to be regarded as the assessee's money, for it to be taxable in his hands. The assessment of this sum, to whatever extent, and in the respective years, could be on him in his capacity as an agent of his two sons. In fact, this is precisely what stands explained by Sh. Nazar Singh (vide his letter dated 15.02.2016), stating that his father had disposed/sold 'some land belonging to us', i.e., referring to himself and his brother, Sh. Prabhjeet Singh. This, however, may not be considered as invalidating the reasons recorded u/s. 148(2), or the issue of notice u/s. 148(1), in-as-much as it was not accompanied by any evidence and, as 13 ITA No. 310/Asr/2018 (AY 2009-10) Udham Singh (Deceased) v. ITO apparent, a tentative information, with even the dates and the amount of sale/s, as well as the status of the land, or its' ownership, being not clear.
4.7 The Revenue's stand of the assessee having not been able to satisfactorily explain the cash deposits in his bank account, cannot, in view of the foregoing, be endorsed/confirmed. I, accordingly, direct the deletion of the impugned addition.
5. I decide accordingly.
6. In the result, the assessee's appeal is allowed.
Order pronounced in the open court on July 26, 2019 Sd/-
(Sanjay Arora) Accountant Member Date: 26.07.2019 /GP/Sr. Ps.
Copy of the order forwarded to:
(1) The Appellant: Udham Singh (Deceased) (through Legal Heir) Sh. Nazar Singh, c/o Sh. Sudarshan Kapoor, Advocate, 63, Police Lines Road, Amritsar - 143 001 (2) The Respondent: The Income Tax Officer, Ward-4, Hoshiarpur (3) The CIT(Appeals)-1, Jalandhar (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order