Income Tax Appellate Tribunal - Chandigarh
Parveen Kumar Mittal, Yamuna Nagar vs Pr.Cit, Panchkula on 2 November, 2021
आयकर अपील य अ धकरण, च डीगढ़ यायपीठ "बी" च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B', CHANDIGARH
BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
AND SHRI R.L. NEGI, JUDICIAL MEMBER
आयकर अपील सं./ ITA No.22/Chd/2021
नधा रण वष / Assessment Year : 2011-12
Parveen Kumar Mittal, बनाम The Pr. C.I.T.,
C/o Rajiv Goel & Associates, Panchkula.
179, Bank Road, Ambala Cantt.
थायी लेखा सं./PAN NO: ABCPM0582C
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Rohit Goel, CA
राज व क ओर से/ Revenue by : Shri Sandeep Dahiya, CIT
सन
ु वाई क तार$ख/Date of Hearing : 30.09.2021
उदघोषणा क तार$ख/Date of Pronouncement: 02.11.2021
(Hearing through Webex)
आदे श/Order
Per Annapurna Gupta, Accountant Member:
Th e a b ove a p p ea l h a s be e n p r efe r re d b y t he a ss e ssee a ga i nst th e or der of t he P r in ci pa l C om mi ss ion e r of I n come Ta x , P a n ch k ul a (in sh o r t t he 'L d . P r .C I T) da te d 1 9 .0 3 .2 0 2 1 re la t in g t o a sse ssme n t y e a r 2 0 11 -1 2 , p a sse d u/s 2 63 o f t he I nc ome Ta x Ac t, 1 9 6 1 ( he re i naf te r re fe r re d to a s 'A ct' in e xe r c ise of re vi s ion a r y ju r is di c tio n.
ITA No.22/Chd/2021
A.Y. 2011-12 Page 2 of 22
2. As tr a n sp i r e s fr om th e or de r of th e Ld . P r .C I T th e re vi si on a ry j ur i sd i cti on u/s 2 6 3 of th e A ct w a s e xe r c ise d b y hi m o n a n or d e r p a ss e d by t he A sse ssi n g Of fi ce r (A O) i n r e- a sse ssme nt p ro cee d in gs u/s 1 47 o f t he Ac t, for the r e a so n tha t h e f ou nd t ha t t he or de r ha d be e n p a sse d i n u nd ue ha s te wi th out co nd uc ti ng ne ce s sa r y in qu ir i e s. Th e Ld. P r .CI T fo un d tha t th e A O ha d fa i le d to ma ke i nd e pe nde n t i n q ui rie s t o ve r if y the sou r ce of ca sh d e p osi te d i n b a nk by th e a ss e ss ee a n d a l so the cl a im of i n te re s t e x pe nd i ture a s pe r se c tio n 3 6 ( 1) ( ii i ) of the Act . Ac cor d ing ly h e c a nce l le d t he o rde r p a s se d b y the A O u/s 1 4 3( 3 ) r . w. s 1 47 of th e Ac t a nd di r e c te d him to pa s s a n or de r a fre sh in a c cor d a nc e w i th l a w. A ggr i e ve d b y th e s a me the a sse ssee h as c ome up i n a p p e a l be f ore us r a is in g the fol l ow in g gr oun d s:
"1. T h a t th e le arne d PC IT ha s erre d on f ac ts and in la w i n exer ci sin g re vi sion ar y po we rs u / s 26 3 of th e A c t wh i l e p a ssin g the ord er d a te d 19 - 3 - 20 2 1 .
2. T h a t the l e arn ed PC IT h as gr ossl y v iol a ted th e pr in c i pl e s of na t u ral ju stic e wh il e p a ss ing th e ord er u/ s 2 6 3 d a te d 1 9- 3 -2 0 2 1 .
3. th a t th e A p pe l l a n t c r ave s l e av e to ad d , al ter, amen d or to su b sti tu te th e a bo ve grou n d s of ap pe al e ith er bef ore or a t th e ti me of h earin g of ca se ."ITA No.22/Chd/2021
A.Y. 2011-12 Page 3 of 22
3. W e ha ve he a r d both th e p a r tie s. Th e Ld .C ou ns e l for t he a sse sse e ha s b e f ore us ch a lle nge d the a ssump ti on of ju ri s di ct ion u /s 26 3 of t he Ac t b y th e Ld . P r . C I T, o n the gr oun d th a t the a s se s sme n t or der s oug ht to be re vi se d it se l f wa s n ul l a nd v oid a nd n o a c ti on cou ld b e ta ke n in la w a g a in st suc h nu l l a nd voi d or d e r . L d . C oun se l f or th e a sse ssee com me n ce d h i s ar gu me n ts b y c ont e nd i n g th a t the j ur i sd i cti on or l e ga l i ty of the or ig in a l p r oce e di ngs c oul d b e cha l le nge d i n sub s e q ue nt co lla te ra l pr ocee di ngs a l so. In this r e ga r d he re lie d u po n t he fol l ow in g d e c is ions la yi n g d ow n the a fore sa id pr op os it ion :
"i) M/s W e s tl i f e Development L td . , IT A
N o . 6 8 8 /M u m / 2 01 6
ii) V i s i o n P r o mo te r s & B u i l d e r s ( P ) L td . V s . C IT , IT A
4 0 1 / C h d / 2 0 1 2 d ate d 2 8 . 9. 2 0 1 7
iii) S u p e r s o n ic T ec hn o l o g i e s Pr i v ate L i m i te d , IT A
2 2 6 9 / D e l / 2 0 1 7 d a te d 1 0 . 1 2. 2 0 1 8. "
4. W i th r e ga r d t o the a sse s sme n t or de r p a sse d u /s 14 7 of the Act be in g n ul l a nd vo id , t he con te n ti on o f the Ld . C oun se l for t he a sse s see w a s th a t the re aso ns r e co rde d fo r e s ca pe me n t of in co me we re b a s e d on in cor re c t fa ct s a nd de mons tr a ted tha t e ve n the AO w a s un a w a re of t he b a s ic f a ct s a nd sh ow ed non -a p p li ca ti on of mi n d by th e AO w h ile re cor d in g the re a son s. Th a t th e sa ti sf a ct ion of f or ma ti on of b e l ief of e sc a pe me n t of in come r e c or de d b y the A O w a s n ot b a se d on a ny ta n gi bl e ma te r i a l. Th e re a sons r e cor de d for reop e n i ng the ITA No.22/Chd/2021 A.Y. 2011-12 Page 4 of 22 ca se of th e a ssess ee , c op y of w hi ch w a s p la c e d b e f ore us a t Pa p e r B ook p a ge N os. 1 5 to 1 7 , wa s r e fe r re d t o wh il e ma k in g the a f ore sa id c on te n ti ons . The co nte nts of the re a s on a re a s un de r :
'1. From perusal of details available in ITS, it is seen that return of income for the Assessment Year 2011-12 has not been filed by the assessee.
2. As per information available in NMS, Cycle-2, the assessee has deposited cash of Rs.10,00,000/- or in more in the Saving Bank Accounts With Punjab National Bank And HDFC Bank during the financial year 2010-11 relevant to the Assessment Year 2011-12.
3. On verification from ITS, it is seen that the assessee has made huge cash deposits in his. bank accounts during the financial year 2010-11 as per details hereunder: -
- Punjab National Bank : Rs. 2,29,85,000/-
- HDFC Bank : Rs. 1,87,64.000/-
TOTAL : Rs.4,17,49,000/-
4. In response to the preliminary query letter/Notice issued in context with the pending NMS proceedings the assessee has not submitted any reply. However, the sheet uploaded by the ITO Ward-4 reveals that the assessee has filed return for A.Y/ 2011-12 vide acknowledgmentno.6444002482 dated 30.09.2011 for the Assessment Year 2011-12 in the office of the Income Tax Officer, Ward-3, Yamuna Nagar.
5. No return of income is appearing on system hence trading result can not be verified.
6. Since no return of income is appearing on system hence, sources of cash deposit of Rs. 4,17,49,000/- cannot be verified.
7. As the return of income is not appearing on system nor has explained the source thereof, in reply to NMS letter, therefore, source of Cash deposits of Rs.4,17,49,000/-ITA No.22/Chd/2021
A.Y. 2011-12 Page 5 of 22 remains unexplained. In view of the facts as reported above, I have reasons to believe that cash deposits in the banks accounts amounting to Rs.4,17,49,000/- is the assessee's undisclosed income which has been escaped from assessment in the hands of the assessee for the Assessment Year 2011-12.
8. As per this office record the return of income for the Assessment Year 2011-12 has not been filed, However, considering the acknowledgment of return of income filed by the assessee to be correct and if it is accepted that return of income was filed, even then it make no difference as the same has not been assessed under regular scrutiny assessment u/s 143(3) or 147 of the Income Tax Act, 1961 and as such the provisions of Section 151(2) of the Income Tax Act, 1961 are attracted in this case.
9. As in this case, no assessment was made and to assess the income escaped from assessment which exceeds Rs. One Lac, accordingly the only requirement to initiate proceedings u/s 147 is reason to believe which has been recorded above (refer paragraph 8) and to which the provisions of clause (b) of Explanation 2 to Section 147 are applicable to facts of this case.
In this case more than four years haw lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 of the Income Tax Act, 1961 has been obtained separately from the Principal Commissioner of Income Tax as.(per the provisions of Section 151 of the Income Tax Act, 1961."
5. Th e con te n ti on of th e Ld .C ou ns e l for th e a sse s see vi s-à - vi s the re a son b e i ng b a se d on in co rr e ct fa c ts or n on- a pp l ic a ti on of mi nd w a s w i th r e gar d to h i s f i nd i ng a t pa r a -1 of the re a son s t ha t n o r e tu r n h a d b ee n fi le d b y the a sse s see , wh i le a t p a r a -4 he re cor de d th e r e tu r n ha v i ng b ee n f ile d a nd sub s e q ue nt ly at p a r a -8 n ote d tha t th oug h the r etu r n of in come ha d not b ee n f ile d b y the a s se s se e a s per th e off ice re cor d , h owe ve r , e ve n c ons ide rin g th e a c kn ow le d ge me nt of ITA No.22/Chd/2021 A.Y. 2011-12 Page 6 of 22 re tur n f ile d b e i ng t ru e , th e s a me h a vi n g n ot b e e n asse ss e d , the p r ov is ion s of se c ti on 1 5 1 (2 ) of th e Ac t come in to p ic tur e . Th e Ld .C ou ns e l for t he a sse s see p oi nt e d ou t tha t th e fa c t of the ma t te r is tha t t he a s se s se e ha d fi l e d re tu rn of i nc ome wh i le t he A O had b a se d h is p re mis e of e sca pe me n t of i nc ome on th e i nco rre ct f a ct th a t no re tur n h a d be e n fi le d b y the a sse sse e a n d , th e re fore , the h uge ca s h d e p os it s a mou nti n g to Rs. 4. 1 7 cr or e s in th e ba n k a c cou nt of th e a sse ssee ta nt a moun te d to u nd i sc los e d inc ome . Ld. C ou n s e l for the a sse sse e fu r the r co nte nde d tha t af te r ha v in g so not e d , t he AO sta te d a t p a r a 4 tha t th e re tur n ha d b ee n f i le d, demo ns tr a ti ng tha t th e A O h im s e l f w a s un su r e of th e fa ct a nd t h e re a f te r a t pa r a 8 re cor d i ng th e r e a s ons f or e sc a pe me n t of i nc ome , bo th in th e l i ght of no n f i li ng of re tur n a n d f i li n g of r e tu r n of in come . He t he re fore c onte n de d th a t the re op e ni n g be in g ba s e d o n in cor r e ct fa c ts w a s ba d in la w a nd the a s se s sme n t or de r p a ss e d ther e fore w a s voi d . In t hi s re ga r d h e r e l ie d u p on the fol l ow in g ca se l a w s th a t th e re o pe ni n g b a se d on i nco rr e ct fa ct s re nde re d the a sse ss me n t o rde r n ul l a n d voi d :
1) Mon i ka R a ni , I TA N o. 58 2 / C h d/2 0 1 9 ,
d a te d 1 8. 0 2. 2 0 20 .
2) Te j P a l B ha r d w a j , I TA N o. 46 4 /C h d/2 0 1 9 ,
d a te d 1 3. 0 5. 2 0 21 .
3) At la s C y cl e I n dustr i e s , 1 80 I TR 3 19 .
6. Ld . C o un se l for t he a sse ssee a l so c ha l le n ge d the
ju ri s di ct ion a s su me d u/s 1 4 7 of t he A ct b y th e A O con te n d in g ITA No.22/Chd/2021 A.Y. 2011-12 Page 7 of 22 tha t e x ce p t for th e AI R /N MS in f o r ma tio n of c a sh d e p os it i n the b a n k a cc oun t of the a s se sse e , w hi c h by i tse lf d i d n ot con sti tu te ta ng ib l e ma te r i a l f or f or ma ti on of b e lie f of e sc a pe me n t of i n come , t he r e w as no oth e r ma t e r ia l w i th th e AO . In th i s rega r d he re l ie d up on t he de ci si on of th e coor d i na te be n ch in th e c a se of Smt. P r a bh a G oya l i n I TA N o.1 1 3 9 /C hd /2 0 1 7 .
7. Ld .D R on the o the r h a nd ve he men tl y a rg ue d a ga i n st the cha ll e n ge by the a s se s se e to t he v a li d it y of the o ri gi n a l pr oc ee d i ng s in the i mp ug ne d co ll a te r a l pr ocee di n gs. His con te n ti on be i n g th a t si n ce the a sse sse e i s gr a n te d a r i gh t to cha ll e n ge the re op e n in g i n the pro cee d in gs i tse l f , a s pe r the gui d e l ine s l a id dow n b y the A pex C o ur t i n the ca s e of G KN Dr i ve sha f ts (I nd ia ) Li mite d Vs. I TO , 2 5 9 I TR 1 9 a n d the a sse sse e h a vi ng n ot d one so, it c oul d not be a ll ow e d to cha ll e n ge i t i n c oll a te ra l p ro cee din gs.
8. W i th r e ga r d to th e de f i cie n cies p oi n te d ou t by the Ld. C ou se l fo r t he a sse sse e i n t he re a son s re c or ded th e Ld .D R con tr ove rte d th e sa me con te n d in g tha t th e fa c t n ote d i n the re a son s re cor de d, th a t the a s se sse e h a d h uge cas h de po si ts wh i ch he h a d fa il e d to e xp la i n be fore the AO , N MS, w a s suf fi c ie nt to for m b e l ie f of e s ca peme nt of i n come . ITA No.22/Chd/2021
A.Y. 2011-12 Page 8 of 22
9. To thi s th e Ld. C ou ns e l f or t he a s se s see re sp on de d b y sta ti n g tha t t he a s se sse e was n ot r e q ui re d to f i le a ny e xp la na ti on to th e AO , N MS . L d .C o un se l fo r the a sse ssee e xp la ine d th a t NMS stoo d for N on fi l e r Ma n a ge me nt Sy ste m, wh i ch w a s a s yst e m de vi se d f or tr a ck i ng a n d a s se ssi n g ca s e s wh e re no re tu r ns w e re fi le d b ut th e re w a s a d ve r se i nf or ma ti on fr om A I R e tc reg a r di n g su ch p er son s. Tha t a sep a r a te w a rd wa s cr e a te d for s uch ca s e s, w he r e b a se d on in for ma tio n i n pos se ssi on of t he de p a rt me n t, the pe rs on s we re r e q ui re d to e xp la in s our ce s of i nv e st me n ts/i nc ome /c a sh d e p os its . I t w a s sta te d th a t t he j ur i sd ic ti on l a y on l y w i th r e g a rd to n on f il e r a sse sse s. Ld . C oun se l fo r the ass e ssee st a te d tha t in the pr e se n t c a se the a s se sse e h a d f il e d re tur n of i ncome , w h ic h wa s d ul y i nti ma te d t o th e AO , N MS, w h o ha d up l oa d e d the in for ma t ion a nd w hi ch fi n ds me n tio n i n th e re a s ons r e cor de d a ls o a t p a r a Ld . C oun se l con te n de d tha t s in ce th e ass e ssee w a s not a non fi l e r t he re fore he w as no t r e q ui re d to o ff e r a n y e xp la na ti on to t he AO , N MS. The r e fo re , he con te nd e d th a t the AO of th e a sse ss ee , w h ile re co rd i n g r e a s ons , cou ld not ha ve de r ive d a n y s tren gth or be ne fi t f r om t he no n f ur n i shi n g of a n y e xp la na ti on b y th e a sse ssee t o the A O , N MS . Tha t in a n y ca se the s a ti sf a cti on of e s ca pe me nt of in co me ha s t o be of the AO of th e a s se sse e and not a b or ro we d s a tis fa c ti on. ITA No.22/Chd/2021
A.Y. 2011-12 Page 9 of 22 10 . Ld .D R agreed w i th t he fa c tua l e x pl a n a tio n of the a sse sse e re ga r d ing th e N MS sy ste m.
11 . W e ha ve h e a r d b oth t he p a r tie s a t l e n gth a n d ca r e fu lly pe r use d the do cume nt s a s a l so the ca se l a ws r e fe r re d to be fore u s.
12 . Th e a s se s see h a s c ha l l e n ge d t he va l i di ty of th e i mp ug ne d or de r be f ore us pa ss e d u /s 26 3 o f the A ct, c on te n din g tha t the or de r sou gh t to be re v ise d b y the PC I T, pa s se d u/s 14 7 of the Act , w a s i tse lf not a va li d o rd e r a n d h e n ce s in ce t he or i gi n a l or de r w a s i nv a l id th e or de r p a sse d in c oll a te r a l pr oc ee d i n gs wa s a l so n ot sus ta i na b l e i n la w . Th e r e ve n ue has con te ste d thi s a r gu me n t bot h w i th re g a rd s t o t he p r op osi tion re ga r d ing cha ll e n gi ng o ri gin a l p r oc ee d i ng s in c oll a te ra l p r oce e d i ngs a nd a ls o on the me ri ts of th e or i gi na l p r oce e d in gs be in g b a d i n la w .
13 . Ta k in g u p f i rs t th e d i sp ute vi s a v is tha t the va l idi ty of an a s se s sme n t o rd e r wh i ch ha s a tta i n e d fin a li ty be in g cha ll e n ge d in coll a te r a l p r ocee d i ng s, w e f in d th a t thi s i ssue ha s b ee n d e a l t w i th b y th e I TA T i n va r i ous d e ci si on s, a s poi n te d ou t by th e Ld .C ou ns e l for th e a s se s se e b e f ore us , ca te g or ic a ll y h old i ng th a t the val id i ty of or i gi na l pr oc ee d i n gs ca n b e r a i se d i n co ll a te r a l p r oce e d i ngs . I t h a s bee n so he ld ITA No.22/Chd/2021 A.Y. 2011-12 Page 10 of 22 ba s e d on th e p r inc ip l e tha t ne it he r the r ule of est op pe l nor pr i nc ip l e of re sjud i ca ta , th a t ne ith e r con se nt n or w a iv e r , c a n con fe r j ur i sd ic tion when n one e xi sts and th a t f in a li ty or con cl us iv e ne ss cou l d a r is e on l y i n re spe c t of or d er s w hi ch a r e comp e te nt o rde rs w ith j ur i sd ic ti on a n d if p ro ce e di n gs a r e n ot va l id l y i ni ti a te d th e or de r w oul d b e voi d or de r w hi ch cou ld ne ve r ha ve a ny fin a li ty or con cl us iv e ne ss .
14 . I n the c a se of M/s We stl i fe De vel op me n t Lt d. ( sup r a ) t he I TA T h a s, a ft e r r e fe r r in g to va r i ous ca se l a ws he ld t ha t t he le ga li ty of the pr oc ee d i ng s ca n b e a gi ta te d i n a sub s e q ue nt pr oc ee d i ng or e ve n i n a co ll a te ra l p r oc ee d i ng or e xe cu ti on pr oc ee d i ng a ls o. The r e le va n t fin d in gs o f th e I TA T a r e a s un de r :
"7. We have heard both the parties on this issue and also gone through the orders passed by the lower authorities as well as the judgments relied upon before us. In our view, we need to decide following issues, before we go into any other issues or merits of the impugned order:
1. Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263?
2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee?
3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order?ITA No.22/Chd/2021
A.Y. 2011-12 Page 11 of 22 In our considered view, since these issues are jurisdictional issues and go to the root of the matter, therefore before dealing with any other issue, we shall first deal with all above three issues one by one, as under:
8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263:
The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as 'primary proceedings'. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as 'collateral proceedings' in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the 'primary proceedings' can be set up in the 'collateral proceedings' and if yes, then of what nature?
8.1. We have analysed this issue carefully. There is no doubt that after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only ITA No.22/Chd/2021 A.Y. 2011-12 Page 12 of 22 from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether the collateral (subsequent) proceedings have been initiated on a valid legal platform or not and for examining the validity of assumption of jurisdiction to initiate the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs.
8.2. In a matter that came up before Hon'ble Supreme Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors., [1955] 1 5CR 117 the facts were that the appellant in that case had undervalued the suit at Rs.2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Registry raised the objection as to valuation under Section 11. The value of the appeal was fixed at Rs.9,980. A contention then was raised by the plaintiff in the High Court that on account of the valuation fixed by the High Court the appeal against the decree of the court of the Subordinate Judge did not lie to the District Court, but to the High Court and on that account the decree of the District Court was a nullity. Alternatively, it was contended that it caused prejudice to the appellant. In considering that contention at page 121, a four Judge Bench of Hon'ble Supreme Court speaking through Vankatarama Ayyar, J. held that:
"it is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the ITA No.22/Chd/2021 A.Y. 2011-12 Page 13 of 22 subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties."
8.3. This judgment was subsequently followed by Hon'ble Supreme Court in the landmark case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193, wherein an issue arose whether a decree can be challenged at the stage of execution and whether a decree which remained uncontested operates as res-judicata qua the parties affected by it. Hon'ble apex court, taking support from aforesaid judgment, observed as under:
"In the light of this position in law the question for determination is whether the impugned decree of the Civil Court can be assailed by the appellant in execution. It is already held that it is the Controller under the Act that has exclusive jurisdiction to order ejectment of a tenant from a building in the urban area leased out by the landlord. Thereby the Civil Court inherently lacks jurisdiction to entertain the suit and pass a decree of ejectment. Therefore, though the decree was passed and the jurisdiction of the Court was gone into in issue Nos. 4 and 5 at the ex-parte trial, the decree there-under is a nullity, and does not bind the appellant. Therefore, it does not operate as a res judicata. The Courts below have committed grave error of law in holding that the decree in the suit operated as res judicata and the appellant cannot raise the same point once again at the execution."
8.4. Similar view has been taken by Hon'ble Supreme Court by following aforesaid judgments recently in the case of Indian Bank vs Manual Govindji Khona reported in 2015 (3) SCC 712. Further, similar view was emphasized by Hon'ble Bombay High Court (GOA Bench) in the case of Mavany Brothers vs CIT (Tax Appeal No 8 of 2007) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution.
8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors, supra were reiterated by the Apex Court in the cases of Superintendent of Taxes vs Onkarmal Nathmal Trust (AIR 1975 SC 2065) and Dasa Muni Reddy v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or ITA No.22/Chd/2021 A.Y. 2011-12 Page 14 of 22 reassess a person can never be waived or created by consent. This decision shows that the basic principle recognized in Kiran Singh (supra) is applicable even to revenue statutes such as the Income Tax Act. Dasa Muni Reddy (supra) is a judgment where the principle of 'coram non judice' was applied to rent control law. It was held that neither the rule of estoppel nor the principle of res ludicata can confer the Court jurisdiction where none exists. Here also the principle that was put into operation was that jurisdiction cannot be conferred by consent or agreement where it did not exist, nor can the lack of jurisdiction be waived.
8.6. These judgments were subsequently noticed by Hon'ble Gujarat High Court in the case of P. V. Doshi 113 ITR 22(Gujrat). This case arose under the Income Tax Act with reference to the provisions of Section 147 dealing with re-assessment. The facts were that the assessment was sought to be reopened under Section 147 and notice under section 148 was issued. Validity of reopening was not challenged upto Tribunal and additions were challenged on merits only. The Tribunal restored the matter to the Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction which was given up before the AAC and not agitated further and that in the remand proceedings what was open before the Assessing Officer was only the question whether the addition was justified on merits and the point regarding the jurisdictional aspect was not open before the Assessing Officer. According to the Tribunal, the assessee having raised the point in the first round and having given it up could not revive it in the second round of proceedings where the issue was limited to the merits of the additions. In ITA No.22/Chd/2021 A.Y. 2011-12 Page 15 of 22 this view, the Tribunal accepted the Revenues plea. The assessee thereafter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was under challenge. According to Hon'ble Gujarat High Court, the rule of res judicata cannot be invoked where the question involved is the competence of the Court to assume jurisdiction, either pecuniary or territorial or over the subject matter of the dispute. Hon'ble High Court further held that since neither consent nor waiver can confer jurisdiction upon the Assessing Officer where it did not exist, no importance could be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against the erroneous assumption of jurisdiction by the assessing authority. According to the Hon'ble Court, the "finality or conclusiveness could only arise in respect of orders which are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction, it would be only a nullity confirmed in further appeals'. In this view of the matter, Hon'ble High Court finally answered the reference in favour of the assessee.
8.7. It is further noted that many of these judgments were discussed and followed by the co-ordinate bench of the Tribunal in the case of Indian Farmers Fertilizers Co-operative Ltd vs KIT 105 lTD 33 (Del), wherein a similar issue had arisen. In this case, the issue raised before the bench was whether it is open to the assessee, not having appealed against the reassessment order, to set up or canvass its correctness in collateral proceedings taken for rectification thereof u/s 154. The bench minutely analysed law in this regard and applying the principle of 'coram non judice' and following aforesaid judgments of the supreme court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order, then the assessee has to step in and protect its interests and the liberty to question even the validity of the reassessment ITA No.22/Chd/2021 A.Y. 2011-12 Page 16 of 22 proceedings ought to be given to it......." (emphasis supplied) 8.8. Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri vs ACIT 98 lTD 87 (Del). In the said case, appeal was filed by the assessee before the Tribunal against the levy of penalty. In the appeal challenging the penalty order, the assessee challenged the validity of block assessment order which had determined the tax liability of the assessee on the basis of which penalty was levied subsequently. The revenue objected with respect to the ground of the assessee raising jurisdictional issues of assessment proceedings in the appeal against the penalty order. After analysing the legal position, as clarified by Hon'ble Gujrat High Court in the case of P.V. Doshi, supra and Hon'ble Bombay High Court in the case of Jainaravan Babulal vs CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty.
8.9. We also derive support from another judgement of Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate re- assessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in earlier proceedings before the Assessing Officer or in the earlier appeal.
8.10. Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est and we hold accordingly."
15 . Ld .D R wa s u na b l e to p oin t o ut a ny d e ci si on ho ld i ng to the con tr a r y. The re fore the ob je ct ion of the Ld . DR to the a rg ume n t of th e Ld . C oun se l for th e a s se sse e cha ll e n gi ng the le ga li ty of the pr e se n t p r ocee d i ng s u/s 2 6 3 of th e Ac t, by con te s tin g the va l i d ity o f th e or i gin a l pr oc ee d i ngs u/s 1 4 7 of the A ct, we h old me r i ts no co ns id e r a ti on a n d i s d is mi sse d. ITA No.22/Chd/2021
A.Y. 2011-12 Page 17 of 22 16 . H a vi ng s a id so, c omin g to the f a cts of t he p re se nt ca se be fore us, the a s se s se e 's a r gume n t in s up p or t of hi s con te n ti on th a t t he or i gi na l pr ocee di n gs in the pr e se n t c a se , u/s 1 4 7 of t he Act , w a s in va l id , i s th e i ns uf fi ci e n cy of in for ma t ion l e a d i ng to the f or ma ti on of b e l ie f of e sc a p e me n t of in come , wh i ch it i s se tt le d l a w, i s a n e s se nti a l pr e re q u i site for re ope n in g the ca se u /s 14 7 o f th e A ct.
17 . W e h a ve p a tie nt ly he a rd a t le ngth t he a rg ume n ts of bo th the p a r tie s in th is r e ga r d a nd ha ve a ls o c a re fu ll y p e r use d the con te n ts of the re a s ons re co rd e d for re ope n in g t he ca s e of th e a sse sse e p l a ce d b e f ore us a t Pa pe r B ook p a ge N o. 15 . We fi nd me r it i n th e con te n ti on of Ld .C ou n se l for the a s se sse e tha t th e re a son s re cor de d d o n ot de mons tr a te suf fi cie nt in for ma t ion i n the p os se ssi on of th e AO to le a d to th e fo rma t ion of b e l ie f of e sc a pe me n t o f in co me . I n f a ct th e in f or ma tio n a v a i la bl e w ith the A O c oul d n ot ha v e le a d to th e for ma ti on o f be lie f of e sc a pe me n t o f a ny i nc ome a t a ll .
18 . As p e r the re a son s re cor de d by th e AO , the be lie f of e sc a pe me n t of inc ome is b a se d o n the in for ma t ion of ca s h de po si ts in the b a nk a c cou nt of th e a s se s se e re ma in in g un e xp la ine d o n acco un t of n o r e tur n of i n come of th e a sse ssee a va i la b l e i n t he sys te m of the dep a r tme n t a n d n o e x pl a n a ti on ITA No.22/Chd/2021 A.Y. 2011-12 Page 18 of 22 re ga r d in g t he sou r ce of the sa me fu r ni sh e d b y the asse ssee to I TO , Wa rd -4 (p a r a 7 o f the re a son s r e p ro du ce d a bove ). 19 . As it t ur ns ou t th e on ly va l id i nf or ma ti on in th e pos se ssi on of t he AO , w h ile re cor d i ng r e a son s f or e sc a pe me nt of i nc ome , wa s t he fa c t of c a sh d e p os it s i n the b a nk a cc oun t of th e a s se sse e a moun ti ng to Rs. 4 .1 7 c r or e s a n d no oth er in for ma t ion . Th e non a va i l a bi l it y of r e t ur n of the a sse ssee i n the i nc ome ta x s yst e ms( I TS ) ha s n o i mp li ca t ion s a nd ca r r ie s no w e i ght f or the for ma ti on of o pi ni on th a t the s our c e of ca s h de po si ts ha s r e ma in e d u ne xp la i ned s in ce i t d oe s n ot me a n a n d is not e q ui v a le nt to th e f a ct o f n o r e tu r n h a vi ng b ee n f ile d b y the a sse ssee . On th e c on tr a ry , we f in d , t ha t the f act in the pr e se n t c a se is th a t r e t ur n w a s f i le d by the a sse s se e w h ic h fa ct i s n ote d b y th e AO a ls o in hi s re a s on me nti on in g the re cor d i ng of th is f a ct b y t he I TO , W a r d- 4. Th e AO , in t ru th , wa s cl ue le ss a nd un ce r ta i n of th e f a ct w he ther r e t ur n of in come w a s f il e d by th e a sse ssee or not .
20 . F ur th e r , e ve n the a s se s se e n ot r e sp on d in g to inq ui r ie s con du cte d b y the A O, N M S, i .e . I TO W a r d -4 r e ga rd i ng th e ca sh d e p osi ts , we f in d , i s of no re le va n ce f or formi n g op in i on of t he ca sh d e pos its b e i ng un exp l a in e d , si nce a s r ig htl y poi n te d o ut by th e Ld . C ou nse l fo r th e a s se s se e , i t i s the AO of the a sse ssee w hos e s a ti sf a cti on i s c r uci a l f or r e open i ng a nd i t ITA No.22/Chd/2021 A.Y. 2011-12 Page 19 of 22 ca n not b e a b or r ow e d sa t is fa c ti on. Al so, a s p oi nt e d out to u s by th e Ld .C o un se l f or the a s se sse e a n d not contr ove r te d b y the D R, the j ur isd i cti on of th e AO , N MS , la y w i th r e g a rd to non -fi l e r a sse ssee s onl y, wh i le t he a s se sse e ha d d ul y com mun i ca te d th e f a ct of hi s h a ving fi l e d h i s re turn of i nc ome for t he imp u gn e d ye a r. Th is f a ct, w e fi nd , st a nd s cor r ob or a te d by the con te n ts of t he re a son s i ts e l f w h ic h n ote tha t the I TO , Wa r d -4 , w ho ha d ju r is d ic tio n in the N MS sy ste m, ha d note d i n hi s s he e t th a t the a sse ssee h a d f il e d re t ur n for a s se s sme n t ye a r 2 0 11 -1 2 i. e . th e imp u gn e d ye a r . Th e r e f ore th e A O, N MS , ha d n o ju r is di c tio n ove r the a s se sse e a nd the a s se s se e was the re fo re n ot re qu ir e d to gi ve a ny e x pl a n a ti on re ga r d i ng the sou rc e o f ca sh d e p os ite d to h im. Th e r e f ore t he fa c t o f no e xp la na ti on of the c a sh de po si ts b e i ng gi ve n b y th e a s se ssee to I TO, W a r d 4 , w a s i r r e le v a nt for the f or ma ti on of b e l ie f of e sc a pe me n t o f inco me .
21 . W ha t tr a ns pi r e s fr om th e a b ove fa c ts th e r e f ore i s th a t the A O on l y ha d in fo rma t ion of ca s h d e p osi ts i n t he b a nk a ccou nt of th e as se sse e , w hi ch f a ct on its ow n , can not le a d to the be l ie f o f e sca p e me nt of i n come . W ha t is cr uc i a l and imp or ta n t fo r a s sumi n g th e j ur i s d ic ti on to r e op e n t he c a se of a n a ss e s see u/s 1 4 7 of th e A ct i s th e "bel ief of th e AO of th e esc ape men t of in c ome ". The me r e f a ct th a t t he c ash i s fou nd ITA No.22/Chd/2021 A.Y. 2011-12 Page 20 of 22 de po si te d i n the b a n k a cc oun t ma y l e a d to a s usp ici on a t be st bu t i t d e fi n ite l y c a nn ot le a d to be li e f o f e sc a pe me nt o f in come . Th e c a sh d e p os it ma y be ju sti f ie d b y th e f a cts a nd fi gu r e s re ve a le d in t he inc ome t a x r e t ur n fi l e d b y the a s se sse e . I n a n y ca se the re ha s t o b e mor e i n for ma ti on i n th e p os ses si on of th e AO to f or m b e l i ef th a t th e c a sh d e p os it s re p re se n t a sse sse s ow n e s ca pe d i ncome . I n the pre se n t c a se we f i nd th at the AO ha s no ca te g oric a l i nf or ma ti on in h is p os se ssi on e i ther re ga r d in g the f a ct of r e tur n ha v in g b ee n f ile d b y t he a sse ssee nor a n y ot he r in fo rma t ion t o th e e ffe ct th a t the s our c e of the ca sh d e p osi ts wa s une xp l ai ne d. No i nqu i ri e s we re in d e pe n de nt ly con du cte d by th e AO r e g a rd i ng th e sou r ce of ca sh d e p osi ts , w h i ch wo ul d ha v e s ure l y a s siste d in the for ma ti on of b e l ie f o f e sc a pe me n t of i nc ome wi th r e g a rd t o the sa me .
22 . Th e r e a s ons r ec or de d the re f ore do n ot ju stif y th e a ssu mp tio n of ju ri s di ct ion b y th e A O to re op e n the c a se of the a sse sse e u /s 1 4 7 of t he Act . Th e or d e r p a sse d u/ s 1 47 of th e Act th e re f ore i s cl e a r l y n ot a v a li d or de r i n the e ye s of la w. 23 . Th e col l a te r a l pr oc ee d i ng s on the sa i d or d e r , u/s 2 6 3 of the A ct, a re the re fore , we a g ree , n ot su sta i n a bl e in la w . ITA No.22/Chd/2021
A.Y. 2011-12 Page 21 of 22 Th e or d e r pa s se d by th e Ld. P C I T u /s 26 3 of t h e Ac t i s a ccor d i ng ly se t asi d e .
24 . B e f ore us a r gu me n ts we re ma d e on th e me r it s o f the ca se a ls o b u t s in ce w e ha ve se t a s id e the or de r p ass e d b y the Ld. P C I T a l low i n g th e le ga l gr ound r a is e d b y th e a ss e ssee , th e a dj ud i ca t ion o n me r it s is me r e ly a c a de mic a n d i s the re fo re n ot be in g de a l t w i th b y us .
25 . Th e a p p e a l of th e a sse sse e is a l l ow e d i n a b ove te rms.
O r de r p r on oun ce d on 0 2 .1 1 .2 0 2 1 .
Sd/- Sd/-
(R.L. NEGI) (ANNAPURNA GUPTA)
याय!क सद य/Judicial Member लेखा सद य/Accountant Member
Dated: 2nd November, 2021
*रती*
आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
• अपीलाथ / The Appellant • यथ / The Respondent • आयकर आयु-त/ CIT • आयकर आय-
ु त (अपील)/ The CIT(A) • +वभागीय त न0ध, आयकर अपील$य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH • गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar ITA No.22/Chd/2021 A.Y. 2011-12 Page 22 of 22 Draft dictated 30.09.2021 Sr.PS Draft placed before author 2021 Sr.PS Approved Draft comes to the Sr.PS/PS 2021 Sr.PS Order signed and pronounced on File sent to the Bench Clerk Sr.PS Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.