Income Tax Appellate Tribunal - Amritsar
Sahil Mahajan, Pathankot vs The Income Tax Officer,, Pathankot on 28 February, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND
SH. N.K.CHOUDHRY, JUDICIAL MEMBER
ITA Nos. 353 & 354 (Asr)/2016
Assessment Years:2005-06 & 2006-07
Sahil Mahajan Vs. Income Tax Officer,
S/o Sh. Surinder Mahajan Ward-6 (3), Pathankot.
C/o Kundan Vila, LIC lance,
Dhangu Road, Pathankot.
[PAN:BZLPM 8089G]
(Appellant) (Respondent)
Appellant by : Sh. Tarsem Lal (Ld. AR)
Respondent by: Sh. Charan Dass (Ld. DR)
Date of hearing: 06.02.2019
Date of pronouncement: 28.02.2019
ORDER
PER N.K.CHOUDHRY, JM:
These appeals have been preferred by the assessee against the separate orders dated 17.03.2016, impugned herein, passed by the Ld. CIT(A)-2, Amritsar u/s 250(6) of the I.T. Act, 1961 (hereinafter called as 'the Act').
2. In these appeal, some of the grounds are common and identical, therefore for the sake of brevity have been taken simultaneously for adjudication.
3. ITA Nos.353 (Asr)/2016 Brief Facts of the instant case are as under:
The Revenue Department had received the information that the assessee had purchased a property for Rs.5.30,000/- having 1/4th share of 2 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO total value of property at Rs.21,20,000/- including stamp duty as per sale deed executed on 21.05.2004 and also purchased land for Rs.8,02,492/- including stamp duty having ½ share of total land of 1058 Marlas vide sale deed executed on 09.02.2005 from Sh. Surinderjit Singh Jaspal & Sons (HUF). After going through the records, it was found that the above named person did not file his return of income for the assessment year 2005-06.
Therefore, notice u/s 148 was issued on 23.03.2012 and sent through speed post No.8274 and was also served personally upon the assessee through Notice Server on 23.03.2012, however the assessee refused to take service as reported by the Notice Server. Then one notice u/s 148 was also served through affixture on the address available on records i.e. Behind Power House, Mohalla Saingarh, Pathankot. Subsequently the assessee filed his return of income declaring an income of Rs.87,200/- on 22.11.2012 under protest. Thereafter, the statutory notices has been issued to the assessee and finally the Assessing Officer added an amount of Rs.6,81,620/- as an unexplained cash u/s 69A of the Act.
4. The assessee challenged the said addition before the Ld. CIT(A) on the legal grounds as well as on merit, however the Ld. CIT(A) affirmed the addition of Rs.9,91,618/- while giving part relief of Rs.501/- to the assessee.
5. At the outset, the assessee has challenged the order impugned herein by raising the additional grounds being legal in nature. The assessee although made the oral submissions but also filed the application for admission of additional grounds, contents of which for the sake of brevity and completeness are reproduced herein below.
3 ITA Nos.353 & 354(Asr)/2016(A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO "PRAYER FOR ADMISSION OF ADDITIONAL GROUND It is humbly prayed that the Hon'ble Tribunal may most kindly allow admission of the following additional grounds:-
1) The assessment order deserves to be quashed as the proceedings under section 147 have been initiated on the basis of suspicion and there was absolutely no material on record giving the AO any reason to believe that any income has escaped assessment.
2) That enquiry notices were issued without seeking approval from the CIT- 2, Amritsar and as such the assessment proceedings initiated u/s 147 were vitiated.
Reliance is placed on the judgement of the Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd reported at 229 ITR 383 wherein the Hon'ble Supreme Court has held that an additional legal ground if the same emanates from the facts on the record.
The aforementioned ground is explicitly a legal ground which is emanating from the Reasons recorded under section 148(2) of the Income tax Act. A copy of the Reasons Recorded is enclosed herewith marked as Annexure A for the kind perusal of the Hon'ble Bench. It is submitted that in the first paragraph of the Reasons Recorded, the AO has mentioned that the assessee had made investment on the purchase of a property and further that the assessee had not filed return of income for this assessment year. On the basis of this information alone, the AO records in second para his satisfaction that he has reason to believe that income has escaped assessment. Clearly, the AO's satisfaction is only a suspicion as nothing has been mentioned in the Reasons Recorded on the basis of which he may positively say that he has reason to believe that any income has escaped assessment. On the basis of mere suspicion, the provisions of section 147 cannot be invoked. Therefore, the assessment framed based on such irregular satisfaction deserves to be quashed and it is prayed accordingly.
Reliance in this regard is placed on the judgment of the Hon'ble Punjab & Haryana High Court in the case of Commissioner of Income tax Vs Smt.Paramjit Kaur reported at 311 ITR 38 wherein it has held by the Hon'ble High Court that there must be nexus between the material and escapement of income and the AO must record his satisfaction for reopening the assessment. Likewise, the AO could not establish nexus that the investment made by the AO represented assessee's income. Thus, the proceedings need to be held as invalid in view of the judgement of the Hon'ble High Court.
Reliance is also placed on the decision of this Hon'ble Tribunal in the case of Shri Gurpal Singh Vs ITO reported at 159 ITD 757 and also on the decision of this Hon'ble Tribunal in the case of Amrik Singh Vs ITO reported at 159 ITD 329 which support the second legal ground of appeal as mentioned above.
In view of the above, it is prayed that the additional ground be allowed to be admitted and also may kindly be allowed.
4 ITA Nos.353 & 354(Asr)/2016(A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO
6. On the contrary, the ld. DR in addition to oral submissions advanced during the course of hearing, also filed the written synopsis in response to the raising of additional grounds, which we also feel appropriate to reproduce herein:
Brief Submissions On Additional ground for reasons recoded for issue of notice u/s 148
1) Assessee has not raised this ground (objections to reason) during the assessment and appellate proceedings and is not entitled to raise this ground now before the ITAT also as wells settled as under.
(Gkn Driveshafts (India) Ltd. vs Income Tax Officer And Ors. on 25 November, 2002 ) holding that "when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice"
As the assesse has not raised objection during the assessment proceeding and even before CIT(Appeal), ground is not valid.
(ii) The additional Grounds raised for the first time before the ITAT without any sufficient cause for not raising before the authorities below is not justified at all. Similar view has been taken as per the following case laws.
(a) M/S. Sanghvi Reconditioners Pvt. Ld vs Union Of India & Ors 5-2-2010 (SC)
(b) Ultratech Cement Ltd vs. ACIT (Bombay High Court) 2017
(c) Goodfath Reconstruction Pvt LD vs ACIT (18-9-13) ITAT Amritsar
(iii) Additional ground is also not valid as there is proper application of mind as the reason recorded as based on more than sufficient material
2) Even as well settled at the time of initiation only some relevant material is needed and even sufficiency and correctness of which is not required at that time and It is for the assessee to prove during the proceedings that assumption made in the notice was erroneous.
[Ramond wollen Mills vs ITO (1999) 236ITR 34 (SC)]
(b) At the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction.
( ACIT vs Rajesh Jaweri stock brokers (P) ltd (2007) 291ITR 500(SC) (c ) [ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)] 5 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO
3) Even reassessment is permissible even without any new material and on the basis of return.
SEWAK RAM vs. INCOME TAX OFFICER 236 CTR 462(P&H) 2010- No doubt, mere change of opinion by itself is not a ground for reassessment as held in the judgments relied upon on behalf of the assessee but if there are reasons to believe that tax has escaped, reassessment is permissible. Reasons can be even on the basis of particulars of the return without any new material. Even if proceedings under s. 143(2) are not taken, reassessment proceedings can be taken.
4) It is further held by following the case of raymond wollen mills vs ITO (1999)236 ITR 34 SC, that count can invalidate a notice issued u/s 148 only if it is satisfied that no material was available before the A.O on the basis of which he could form a belief or that the said belief was not at all bonafide or was based on wage, arbitrary or non-specific information. Thus exception to reason only when no material available with Assessing Officer- belief can be made on any material whatsoever (Grover nursing Home vs ITO -248ITR 493-2001 (P&H))
5) It is further held that - belief can be reached in any manner, and is not qualified by a pre- condition of faith and true disclosure of material facts by the assessee as contemplated in the pre amended Section 147(a) of the Act.
(Jawand Sons vs CIT 18 November. 2009(P&H)
6) It is also held that satisfaction arrived at by any relevant material after following due procedure, it cannot be assailed, it may involve change of opinion but not at par with mere change of opinion.
(Tilak raj bedi vs JCIT (2009) 319 ITR 385-P&H)
7) It is well settled that even on the basis of audit objection on the on the point of fact can be a valid ground for reopening of assessment.
(ii) Usha International Ltd, vs Assessee on 9 March, 2015 (ITAT Delhi)-As this tangible material, in the shape of audit objection, came into existence after the completion of the original assessment and led to the initiation of reassessment, we hold this report of the internal audit party, formed a valid foundation for the initiation of reassessment .
proceedings, thereby pushing the case outside the ambit of 'change of opinion
(iii) CIT PVS Beedies (P) ltd vs. 1999 237 ITR 13 SC (8) It is also well settled that even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected." (AIA firm vs CIT (1991) 189 ITR 285(SC) - The expression 'information' in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment...Jurisdiction of the Income-tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information, must, it is true, have come into the possession of the Income- tax Officer after the previous assessment, but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials 6 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected."
(9) It is also held that assessee having not pointed out during assessment proceedings about expenses incurred relatable to tax free income u/s 14A there was omission and failure on its part to disclose fully and truly material facts and hence reopening of assessment was justified.
(Honda Siel Power Products Ltd. v. Dy. CIT (2011) Delhi High court (SLP of the assesse dismissed)
7. Having heard the parties at length and perused the material available on record. The assessee has raised the additional grounds while relying upon various Apex Court's judgments. The decisions relied upon by the revenue department are factually dissimilar. In view of the judgment passed by the Apex Court, in the case of National Thermal Power Corporation Ltd. [229 ITR 383], as the additional grounds clearly emanates from the facts already on record and there is no embargo, therefore we do not have any hesitation to allow to raise the additional grounds which are un-doubtly legal in nature as it is settled by the Apex Court that the legal ground(s) if not raised at the lower stage, can be raised before any higher Adjudicatory Authorities/ Courts.
8. Now coming to the legal grounds raised by the assessee. The assessee has raised the issue that in the instant case, enquiry notices were issued without seeking approval of the CIT-2, Amritsar, which vitiates the assessment proceedings, initiated u/s 147.
Let us to peruse the provision as contained in second proviso to sub- section 6 of Sec.133 of the Act which says:
[Provided further that the power in respect of an enquiry, in a case where no proceeding is pending, shall 7 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO not be exercised by any Income Tax Authority below the rank of [Principal Director or] Director or [Principal Commissioner or] Commissioner [other than the Joint Director or Deputy Director or Assistant Director] without the prior approval of the [Principal Director or ] Director or, as the case may be, the [Principal Commissioner or] Commissioner. ] From the contents of the proviso, it is clear that power in respect of an enquiry, in a case where no proceeding is pending, shall not be exercised by any Income Tax Authority below the rank of Officers as specified in the proviso, without the prior approval of the higher authorities as specified, which is Commissioner in the instant case. The proviso is mandatory in nature therefore cannot be side-lined.
8.1 While coming to the order sheet of assessment proceedings, it reflects that before initiating an enquiry for framing the reasons u/s 147 of the Act, the assessee nowhere got approval of the Commissioner, hence, on this ground alone, the assessment proceedings are liable to be quashed.
9. While coming to the second aspect of the case, the assessee has raised the issue that the proceedings u/s 147 in the instant case have been initiated on the basis of suspicion and there was absolutely no material on record, by which it can be said that there was any reason(s) to believe before the AO qua escapement of income. The assessee in support of its case also relied upon the judgments passed by the jurisdictional High Court in the case of CIT vs. Smt. Pramjit Kaur [2009] 311 ITR 38 (P&H) and by the Co-ordinate Benches in the case of Gurupal Singh vs. Income Tax officer 8 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO [2016] 159 ITD 797 (Asr) and Amrik Singh vs. Income Tax Officer [2016] 159 ITD 329 (Asr). Relevant part of the judgment passed by the Jurisdictional High Court in the case of Commissioner of Income Tax vs. Smt. Pramjit Kaur (supra) is reproduced herein below.
"7. It is undisputed that the Assessing Officer had initiated reassessment proceedings on the basis of information received from the survey circle that the assessee had got prepared a demand draft for a sum of Rs.83,040 which was not accounted in the books of account of the assessee. The Assessing Officer had not examined and corroborated the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it cannot be said that the same was based on the belief that the income chargeable to tax had escaped income. The Assessing Officer has to act on the basis of" reasons to believe" and not on " reasons to suspect". The Tribunal had, thus, rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and, therefore, the issuance of notice under s. 148 of the Act for reassessment proceedings was not valid."
9.1 In the instant case, from the reasons recorded, it reflects that the Assessing Officer mainly relied upon the information to the effect that the assessee has purchased a property for Rs. 5,30,000/- having ¼ share of total value of property at Rs.21,20,000/- including stamp duty as per sale deed executed on 21-05-204 and also purchased land for Rs. 80,08,492/- including stamp duty having ½ share of total land of 10.58 Marlas vide Sale deed executed on 09-02-2005 from Sh. Surinderjit Singh Jaspal & sons (HUF). After going through the records of this office, it has found that the above named person has not filed his return of income for the Assessment Year 2005-06.
In second para, observed that in view of the above facts, there is reason to believe that on account of assessee's failure to make the return of 9 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO income u/s 139 of the Act, income of Rs.13,32,482/- chargeable to tax has escaped assessment i.e. unexplained investment made by the assessee on account of investment made by the assessee on account of investment made for the purchase of property at Rs.13,32,482/- during the previous year relevant to the assessment year 2005-06 within the meaning of section 147 of the Income Tax Act 1961.
9.2 Let us to peruse the relevant provisions of law:
"147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any A.Y., he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the a.y. concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).
Provided that where an assessment under subsection (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.
Explanation 1.- Production before the assessing officer of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation 2- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment namely:-
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is 10 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income tax.
(b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the assessing officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return.
(c) Where an assessment has been made, but-
(i) income chargeable to tax has been under
assessed; or
(ii) such income has been assessed at too low a rate; or
(iii) such income has been made the subject of excessive relief under this act; or
(iv) excessive loss or depreciation allowance or any other allowance under this act has been computed."
9.3 The law on the provisions of section 147 is very clear. Section 147 authorizes the Assessing Officer to assess or re-assess the income chargeable to tax if he has reason to believe that the income for any assessment order has escaped assessment and has duly recorded these reasons, however as it well settled that the reasons to believe must be bona fide and must be based upon relevant material on which a reasonable person could have form the requisite belief.
In the present case, the first part is only information and the second paragraph of the so-called reasons is mere reason. From the reasons recorded, it nowhere reflects that the Assessing officer has ever applied his own mind and independently arrived at a belief that on the basis of the material which he had before him, income had escaped assessment and made any exercise to find out the real controversy and/or material to substantiate the initiation of process u/s 147 of the Act and ever incorporated the material before re-opening the assessment and satisfied 11 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO himself before issuing the notice u/s 148 of the Act. It is clear that the Assessing Officer failed to make any exercise for reopening of the case independently and with corroborative material. The jurisdictional High Court in the case of CIT vs. Smt. Pramjit Kaur (supra) rightly held that the Assessing Officer has to act on the basis of "reasons to believe" and not on "reasons to suspect". The decisions relied upon by the revenue department are factually dissimilar, whereas the facts of the instant case are similar and identical to the facts of decision rendered by the jurisdictional High Court in the aforesaid case. As in the instant case, the initiations of proceedings u/s 147 of the Act are based upon no evidence and/or un- corroborative material. The Assessing Officer further failed to establish the nexus that the investment made by the AO represented assessee's income. In our considered view, the competent authority is required to indicate some link or nexus while recording reasons for belief that the consideration amount of property acquired is chargeable to tax and has escaped the assessment, in this case the proceedings u/s 147 of the Act itself are vague, hence in any sense cannot survive and therefore we do not have any hesitation to held that the Ld. CIT(A) was absolutely unjustified in upholding the reopening of the assessment u/s 147 of the Act, without appreciating the facts of the case, explanation submitted and evidences places on record judiciously. Hence on this ground also, the assessment proceeding/order is liable to be quashed.
10. Now coming to the 3rd issue, which the assessee has raised by filing an affidavit qua service of notice u/s 148 of the Act. From the notice dated 23.03.2012 it reflects that the notice u/s 148 of the Act dated 23.03.2012 (Paper Book page -4) was sent through speed post to the assessee on 23.03.2012 itself, however, from the order of affixture dated 23.03.2012 12 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO (page no.5 of PB), it reflects that the order for notice by affixture was made on 23.03.2012 itself without waiting for the outcome of the notice sent on dated 23.03.2012 through speed post.
10.1 Identical situation has already been dealt with by the Co- ordinate bench in the case of Om Prakash Sharma Vs Income Tax Officer (ITA No.500(Asr)/2017 decided on 09-10-2018 ). Relevant part of the judgment reproduced herein below.
5. However, the Assessing Officer on satisfying about the non -possibility of service of notice through ordinary means, decided to serve through affixture at the last known address of the assessee. It is th really surprising that the notice sent through speed post remained undelivered upto 29 Sep., 2010 and thereafter the same must have been received by the Assessing Officer after 2 and 3 st days, may be on 1 October, however, the A.O. passed the affixture order on 28.09.2010. We have failed to understand as to how the A.O. has perceived on 28.09.2010 about the non-service of the notice on the assessee that apparently seems to be mere formality without any basis ,which creates many doubts and shrouds in the genuineness of the assessment proceeding, hence, we do not any hesitation to hold that the notice dated 20.09.2010 as well as 28.09.2010 by way of affixture never been served upon the assessee and in the absence of statutory notices, the Assessment order can not be held valid and therefore on the aforesaid reasons is liable to be set aside and pursuant thereto the appellant order which is impugned herein also liable to be set aside.
6. Even otherwise, in the affixture order it is mentioned that the notice u/s 143(2) of the Income Tax Act, 1961 are not served by ordinary means on the last known address of the assessee, however, from the IT Returns for AY.2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-9 and 2009- 10, it clearly appears that the assessee is showing address as Keshav Nagar, Mithapur Road, Jalandhar which according to our mind liable to be treated as last known address of the assessee, however from the notices, it reflects that the Assessing Officer tried to serve the notice at 2-D.C. Nagar, Cannt Road, Mithapur, Jalandhar which otherwise, is not last known address of the assessee, hence, on this aspect also, we are inclined to hold that the Assessing Officer failed to serve the notice to the assessee at his last known address and therefore not in confirmatory with the provisions of the Order-5, Rule -17 & Rule-20 of the C.P.C .
7. The co-ordinate Bench at Amritsar dealt with the identical issue in the case of Sh. Shridhar Bedi through Legal Heir Smt. Sonil Bedi Versus Income Tax Officer Ward -3, Phagwara (ITA No.02(Asr)/2017) . Relevant part of the order is reproduced herin below:
7.2 Rule-1 of Order V of CPC, enumerates the procedure for issuing the summons and according to the rule-10 of Order-V of CPC, service of summon(s) shall be made by delivering or tendering a 13 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO copy thereof signed by the judge or such officer as he appoints in this behalf, and seal of the Court.
7.3 Rule 17 of order V further enumerates the procedure when defendant refuses to accept the service, or cannot be found. Rule 17 further mandates that where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgement, or where the serving Officer, after using all due and reasonable diligence, cannot find the aforesaid person, who is absent from his residence at the time when service 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 there is no agent empowered to accept the service of the summons on his behalf, nor any other persons on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain.
7.4 Further Rule 20 of order-V speaks about the substituted services, according to this rule, when the Court is satisfied that there is a reason to believe that the defendant is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way, the Court shall order the summons to be served by affixing a copy thereof in some conspicuous place in the Court and also upon some conspicuous part of the house (if any) in which the defendant is known to have last resided or carried on business or personally worked for gain, or in such other manner as the Court thinks fit.
7.5 The mandate of Rule-1, 17 & 20 of the Order -V is that attempt should be made by the Assessing Officer for serving the notice in the ordinary way and if the notice cannot be served in the ordinary way on the reason that the Assessee cannot be found, after using all due and reasonable diligence and there is no likelihood of his being found at the residence within a reasonable time and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, and the Assessing Officer is satisfied that there is a reason to believe that the Assessee is keeping out of the way for the purpose of avoiding service, or that for any other reason the summons cannot be served in the ordinary way, then only the Assessing Officer can order for service of summons by way of affixing a copy thereof in some conspicuous place as defined under Rule 20 of order-5 of the CPC but not otherwise .
7.6 From the assessment order, it does not reflect that the Assessing Officer had ever tried to issue and serve the alleged notice(s) in ordinary way and after exhausting ordinary attempt, while recording the reasons, adopted the substituted service by way of affixture upon the deceased assessee. As it is clearly reflects from 14 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO the chronological dates and events that notice u/s 148 was issued in the name of the deceased assessee on 29th March, 2012 which claimed as has been served through affixture on 31st March, 2012 and thereafter notice u/s 142(1) of the Act claimed as has been served on dated 29th May, 2012 through affixture on the deceased assessee, creates many doubts with regard to the genuineness of the service of the notice on the deceased assessee because if the notice has been served through affixture on 31st March, 2012 then certainly the notice server would have used his due and reasonable diligence for not finding the deceased assessee and would have come to the knowledge about the death of deceased assessee and must have communicated the said information to the assessing officer and thereafter the Assessing Officer would had no option except to substitute the assessment proceedings in the name of the legal heir only, however, it is admitted fact that notice 29.05.2012 u/s 142(1) was also served to the deceased assessee by way of affixture and thereafter, getting the knowledge about the death of the assessee, the Assessing Officer initiated the assessment proceeding against the sole legal heir. The notice dated 18.02.2013 u/s 142(1) has also been claimed as served upon the legal heir, through affixture only. While serving the notice through substituted service to the sole legal heir of the assessee, the Assessing Officer never tried to serve the legal heir in the ordinary way, however made an attempt only through substituted service which also create lots of doubts about service and validity of the notices which according to our mind is not mere procedural requirement but mandatory.
7.7 The judgments relied upon by the Ld. AR, in support of assessee's case speaks about one thing only that proper notice u/s 148 of the Act for initiating reassessment proceeding is not a mere procedural requirement but the service of the prescribed notice on the assessee is a condition precedent to the validity of any of the reassessment made u/s 147. It is settled law that if no notice is issued or if the notice issued is shown to be invalid then proceedings initiated and carried by the Income Tax Officer without a notice or in pursuance of invalid notice would be illegal and void and shall vitiate the entire proceedings.
In the aforesaid analyzation, we do not have any hesitation to hold that in the instant case, no notice has ever been properly served either u/s 148 or 142(1) of the Act upon the deceased assessee or his sole legal heir. Therefore, the Assessment Order under challenge cannot be sustained and impugned order under challenge liable to be set aside under the limb of non- service/invalid notice itself and hence, the order passed by the Ld. CIT(A) is set aside and the addition confirmed by the Ld. CIT(A) stands deleted.
15 ITA Nos.353 & 354(Asr)/2016(A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO
8. Respectfully fowling the dictum of co-ordinate bench and even otherwise as we observed in aforesaid paras independently, we do not have hesitation to held that the service of the prescribed notice on the assessee is a condition precedent to the validity of the assessment proceedings. It is settled law that if no notice is issued or if the notice issued is shown to be invalid then proceedings initiated and carried by the Income Tax Officer without a notice or in pursuance of invalid notice would be illegal and void and shall vitiate the entire proceedings. As in the instant case, while passing the affixture order, no material qua non-service of the notice through ordinary means was available with A.O. as on 28-09-2010 because the notice sent through speed was received by the A.O. only after 29-09-2010 but not before to that . Even otherwise the notices appears to not sent to last known address of the Asseeee hence we are of the considered opinion that no notice has ever been served upon the assessee neither properly nor at the last known address, therefore the assessment order as well as appellate order which is impugned herein are liable to be set aside, hence the same are set aside.
10.2 We have analyzed the issue under consideration and compared with the facts of the aforesaid decision rendered by the Co-ordinate Bench and therefore are of the considered view that the instant case is squarely covered by the aforesaid case. Even in the instant case , we have called for the record of assessment proceedings, from which it does not reflect that the said notice u/s 148 was ever served upon the assessee or received by the assessee at the address as mentioned in the notice u/s 148 and the order for affixture of notice dated 03.03.2012. Even we realized that the Assessing Officer has sent the notice u/s 148 to the assessee at the address i.e. Behind Power House, Mohalla Saingarh, Pathankot, whereas in the assessment order, the address has been written as C/o Kundan Vila, LIC Lane, Dhanu Road, Pathankot, which further strengthen the case of the assessee that no notice or any enquiry letters dated 07.03.2012, 04.06.2012 and 12.11.2012 has ever served upon the assessee at his proper address. Therefore, non-service of notice u/s 148 of the Act, vitiate the assessment proceedings and therefore on this ground also, the assessment proceeding/order is liable to be quashed. Hence, on the aforesaid analyzations and deliberations and in cumulative effects, we do not have any hesitation to quash the assessment order.
16 ITA Nos.353 & 354(Asr)/2016(A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO
11. ITA Nos. 354(Asr)/2016 (2006-07) The brief facts of the instant case are that the Revenue Department had received the information to the effect that the assessee has jointly purchased the property measuring 1.1 Kanal consisting a house and one shop, situated at Mohalla Khazanchian for Rs.35 lacs along with Sh. Vijay Kumar S/o Shri Joginder Pal, Sh. Srijal Gupta S/o Sh. Sahib Dayal Mahajan and Sh. Rakesh Gupta S/o Sh. Surinder Kumar, in which the assessee was having 1/4 share in the aforesaid property, from one Sh. Surinderjit Singh, S/o Sh. Achar Singh, R/o, H.No.196, Ward No.15, Mohalla Mhazanchian, Gurdaspur. Despite issue of enquiry letters dated 01.02.2013 and 28.02.2013, the assessee did not file any explanation qua source of investment made for the purchase of aforesaid property, therefore after getting approval from the Addl. CIT, Range-6 Pathankot and after recording reasons for initiation of proceedings u/s 147 on 13.03.2013, notice u/s 148 of the Act was issued to the assessee on 15.03.2013 through speed post No.8093 requiring the assessee to file its return of income on or before 28.03.3013, in response to which the assessee failed to file his return of income by the aforesaid date and thereafter, statutory notices have been issued however the assessee failed to comply. Finally a show cause notice dated 10.12.2013 was issued and served upon the assessee on 12.12.2013 requiring him to explain as to why an investment made for the purchase of above mentioned property should not be treated as an unexplained investment. Further vide notice dated 2nd January, 2014, final opportunity was given. In response to the aforesaid show cause notice, the assesse filed his return of income declaring 'Nil' income vide acknowledgment No.3488 dated 20.01.2014 and thereafter notices u/s 143(2) and 142(1) along with questionnaire served upon the assessee on 03.02.2014 fixing the case for 17 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO hearing on 07.02.2014. A copy of the reasons recorded for re-opening of the case u/s 147 of the Act was also issued to the assessee simultaneously. However, in response thereto, neither any one attended the assessment proceedings nor any explanation of investment made as referred above was filed by the assessee. Therefore, the Assessing Officer completed the assessment proceedings u/s 144/147 of the Act and made the addition of Rs.6,41,988/- as an unexplained deposits u/s 68 of the Act.
12. Feeling aggrieved, the assessee challenged the assessment order before the Ld. CIT(A) who affirmed the addition u/s 69A of the Act which is under challenge before us.
13. At the outset, the Ld. AR submitted that he is praying for admission of additional grounds being legal in nature which goes to the root of the case. The assessee in support of admission of additional grounds also filed application for admission of additional grounds, contents of which for the sake of brevity and completeness, reproduced herein.
"PRAYER FOR ADMISSION OF ADDITIONAL GROUND It is humbly prayed that the Hon'ble Tribunal may most kindly allow admission of the following additional grounds:-
1) The assessment order deserves to be quashed as the proceedings under section 147 have been initiated on the basis of suspicion and there was absolutely no material on record giving the AO any reason to believe that any income has escaped assessment.
2) That enquiry notices were issued without seeking approval from the CIT- 2, Amritsar and as such the assessment proceedings initiated u/s 147 were vitiated.
3) The AO had adjourned the enquiry proceedings to 08.03.2013 but without waiting for the same, recorded the satisfaction u/s 148(2) on 06.03.2013 which vitiated the proceedings u/s 147.18 ITA Nos.353 & 354(Asr)/2016
(A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd reported at 229 ITR 383 wherein the Hon'ble Supreme Court has held that an additional legal ground if the same emanates from the facts on the record.
The aforementioned ground is explicitly a legal ground which is emanating from the Reasons recorded under section 148(2) of the Income tax Act. A copy of the Reasons Recorded is enclosed herewith marked as Annexure A for the kind perusal of the Hon'ble Bench. It is submitted that in the first paragraph of the Reasons Recorded, the AO has mentioned that the assessee had made investment on the purchase of a property and further that the AO's satisfaction is only a suspicion as nothing has been mentioned in the Reasons Recorded on the basis of which he may positively say that he has reason to believe that any income has escaped assessment. On the basis of mere suspicion, the provisions of section 147 cannot be invoked. Therefore, the assessment framed based on such irregular satisfaction deserves to be quashed and it is prayed accordingly.
Reliance in this regard is placed on the judgment of the Hon'ble Punjab & Haryana High Court in the case of Commissioner of Income tax Vs Smt. Paramjit Kaur reported at 311 ITR 38 wherein it has held by the Hon'ble High Court that there must be nexus between the material and escapement of income and the AO must record his satisfaction for reopening the assessment. Likewise, the AO could not establish nexus that the investment made by the AO represented assessee's income. Thus, the proceedings need to be held as invalid in view of the judgment of the Hon'ble High Court.
Reliance is also placed on the decision of this Hon'ble Tribunal in the case of Shri Gurpal Singh Vs ITO reported at 159 ITD 757 and also on the decision of this Hon'ble Tribunal in the case of Amrik Singh Vs ITO reported at 159 ITD 329 which"support the second legal ground of appeal as mentioned above.
In view of the above, it is prayed that the additional ground be allowed to be admitted and also may kindly be allowed.
14. The Ld. DR in order to controvert the claim of the assessee qua admission of additional grounds as well as on merit, also preferred to file the written response in addition to oral submissions, which for the sake of completeness we have already reproduced in para no. 6 of the order and may be read as part and parcel of this appeal as well.
19 ITA Nos.353 & 354(Asr)/2016(A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO
15. Having heard the parties at length and perused the material available on record. In ITA Nos.353 (Asr)/2016, while respectfully following the decision of Apex Court in the case of National Thermal Power Corporation Ltd. [229 ITR 383], we allowed the raising of additional grounds being legal in nature therefore, in view of the order in ITA Nos. 353 (Asr)/2016 and the fact that the additional grounds as raised by the Assessee clearly emanates from the facts already on record, we allow the assessee to raise the additional grounds in this case and admit the same for adjudication.
16. First we will dispose of the peculiar issue which pertains to recording of reasons on 06-03-2013. From the order sheet, it clearly reflects that vide order dated 28.02.2013, the Assessing Officer had issued preliminary notices and fixed the assessment proceedings for 05.03.2013 and thereafter, on 05.03.2013 as per order sheet, Sh. Surinderjit Mahajan, father of the assessee appeared and sought further date for reply and therefore the case was adjourned to 08.03.2013. However, from the reason recorded, it clearly appears that the Assessing Officer on dated 06.03.2013 itself recorded the reasons for reopening of the case u/s 147 of the Act, without waiting for the response and/or outcome of date 08-03-2013 which was fixed by the assessing Officer for response from the assessee, therefore it clearly goes to show proper opportunities of being heard were not given to the assessee. Further from the recording of reasons before 08-03-2013 (date fixed for proceedings u/s 147 of the Act) also creates doubts qua sanctity of reasons recorded and issue of notice u/s 148 of the Act in pursuance thereof. The co-ordinate bench in the case of Om Prakash Sharma Vs Income Tax Officer (supra) dealt with the situation where the assessing officer without waiting for the outcome of notice u/s 148 of the Act which was sent through speed post, perceived about the non-service of 20 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO the notice by ordinary course and passed the affixture order, therefore the Bench quashed the assessment proceedings.
16.1. We have analyzed the issue under consideration and compared with the facts of the aforesaid decision rendered by the Co-ordinate Bench and therefore of the considered view that the instant case is also squarely covered by the aforesaid case. Because in the instant case, the assessing officer vide proceeding dated 05-03-2013, adjourned the assessment proceedings to 08-03-2013 for filling of reply by the assessee, however before to that date, on 06-03-2013 recorded the reasons and therefore in our considered view, the action of the assessing officer clearly seems be pre- notional, pre-conceived and biased, hence we do not have any hesitation to quash the assessment order.
17. Even the assessment order pursuant to assessment proceedings u/s 147 of the act in the instant case is also liable to be quashed in view of decision made in para no. 9 of the order passed in ITA Nos. 353 (Asr)/2016.
18. Hence in cumulative effect on the aforesaid analyzation, observations and peculiar facts and circumstances, we quash the assessment proceedings/order. As we have already quashed the Assessment proceedings/Order for want of proper opportunities to the assessee before recording the reasons for re-opening and also held the reopening of the assessment u/s 147 of the act, absolutely unjustified, therefore do not consider it appropriate to travel to the other issue(s) raised by the assessee which in our considered opinion shall be academic exercise only.
21 ITA Nos.353 & 354(Asr)/2016(A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO
19. In the result, both the appeals filed by the assessee stands allowed.
Order pronounced in open Court on 28.02.2019 Sd/-
(SANJAY ARORA) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
I have perused the order proposed by my ld. brother, JM in the captioned appeals. I am in agreement therewith. My point of difference, however, and which explains this assent order, is in respect quashing the assessment for A.Y.2006-07 (Appeal No.354/Asr/2016) on the ground of alleged non-service of notice u/s. 148(1). The said notice, issued on 15.3.2013 (i.e., after recording reason/s u/s. 148(2) on 13.3.2013, and seeking approval from the competent authority on 14.3.2013) was, as noted in para 3 (page 2) of the assessment order dated 20.3.2014, sent through speed-post (giving it's number), as also personally served through the notice server on 18.3.2013. The assessee did not furnish any return of income in response thereto, which he was to by 28.3.2013. This was followed by notices u/s. 142(1) (three in number), which were again duly served on the assessee (dates specified). Non-compliance thereof led to the impugned assessment u/s. 144 r/w sec. 147. The assessee did not dispute the service of any of these notices before the first appellate authority. No ground in its respect, either per the appeal memo (Form No.36), or even per the additional grounds, stands raised before us. As such, raising a claim at this stage, without any material on record, would be of no moment. The same is no more than a bald claim and, accordingly, liable to be dismissed at the threshold.
22 ITA Nos.353 & 354(Asr)/2016(A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO In fact, jurisdiction to frame an assessment u/s. 147 gets assumed on the basis of issue of a notice u/s. 148, and not its service (R.K. Upadhyaya v. Shanabhai B. Patel [1987] 166 ITR 163 (SC)). The time limit for completing the same is, again, with reference to service of the said notice, so that it's non-service, as contended, would only imply it being caused to be served, giving a fresh lease of life for framing the assessment after due representation! The service of notice u/s. 148 on the assessee serves to signify him that assessment proceedings in his case have been since initiated for assessing the escaped income, giving opportunity to return the same or otherwise explain the return as originally filed in the ensuing proceedings. Lack of notice, assuming so, would only imply an irregularity, i.e., of the assessment being defective for want of proper opportunity to the assessee to state its' case, warranting its' restoration to the stage where the irregularity had set in (Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC); Supdt., Central Excise v. Pratap Rai [1978] 114 ITR 231 (SC)), decisions by the larger benches of the Apex Court). It is not a ground for quashing the assessment, and for which reference may also be made to the decisions interalia, in CIT v. Jai Prakash Singh [1996] 219 ITR 737 (SC); State of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC). The facts of each of these cases are telling and relevant. Reference in this regard may also be made to the decision in CIT vs. Jasbir Singh [2014] 103 DTR 427 (P&H) where the hon'ble court set aside the assessment to the file of the AO for conduct of proceedings afresh.
There is, in fact, no ground qua want of opportunity before the ld. CIT(A), nor indeed before the Tribunal. Why, there is, even as afore-noted, no ground for 23 ITA Nos.353 & 354(Asr)/2016 (A.Ys.2005-06 & 2006-07) Sahil Mahajan vs. ITO non-service of the notice u/s 148, which, though orally raised, was not seriously argued by the ld. counsel, Sh. Lal, during hearing.
I decide accordingly.
Sd/-
Place: Amritsar (Sanjay Arora) Dated:28.02.2019 AM, Amritsar Bench /PK/ Ps. Copy of the order forwarded to:
(1) Sahil Mahajan S/o Sh. Surinder Mahajan, C/o Kundan Vila, LIC lance, Dhangu Road, Pathankot (2) The ITO, Ward-6(3), Pathankot (3) The CIT(A)-2, Amritsar (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order Filename: Sahil Mahajan, 353 & 354 -16 Directory: D:\DOCUMENT\NKC Orders 2018 Template: C:\Users\etc parmod\AppData\Roaming\Microsoft\Templates\Normal.dot Title: IN THE INCOME TAX APPELLATE TRIBUNAL Subject:
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