CHHEDA LAL SHUKLA,NOIDA V. ITO WARD - 1(2), NOIDA

ITA 1573/DEL/2020

AI Insights

The case involves Chheda Lal Shukla, the appellant, who appealed against the order of the Commissioner of Income-tax (Appeals)-1, Noida, which arose from an assessment order passed under sections 147/144 of the Income Tax Act, 1961, by the ITO, Ward-1(2), Noida. The assessment was reopened based on Non-PAN AIR information suggesting that the assessee sold a property and claimed exemption under section 54, which was not allowed by the CIT(A). The Tribunal admitted additional grounds regarding the non-service of notice under section 148 and the incorrect facts used for reopening the assessment. The Tribunal found that the notice was not served at the correct address and that the reasons for reopening were factually incorrect, leading to the quashing of the assessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23762 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Other Referred Cases: CIT Vs. Chetan Gupta [382ITR 613], CIT Vs. Mani Kakkar [178 Taxman 315], Veena Devi Karnani Vs. ITO [410ITR 23], CIT Vs. Rajesh Kumar Sharma [311 ITR 235], Hafizuddin Hazi (ITA No. 3690/D/2021), PCIT vs. RMG Polyvinyal (I) Ltd., Vijay Haishchandra Patel vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: AJAY WADHWA; RAGINI HANDA
• Keywords: Reassessment proceedings; Cost of acquisition; Period of limitation; Reopening of assessment; Capital Gains; Competent authority
• Section: 147; 148; 142(1); 292BB; 201; 54; 153

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.1573/Del/2020 Assessment Year: 2010-11 Chheda Lal Shukla, C-66, Sector 53, Noida, Uttar Pradesh – 201 301. PAN: AAXPS6882R Vs ITO, Ward-1(2), Noida. (Appellant) (Respondent) Assessee by : Shri Ajay Wadhwa, Advocate & Ms Ragini Handa, Advocate Revenue by : Shri Rajesh Kumar Dhanesta, Sr.DR Date of Hearing : 02.01.2025 Date of Pronouncement : 10.01.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the assessee against the order dated 18.06.2020 of the Commissioner of Income-tax (Appeals)-1, Noida (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeals No. 65/E-filed/2018-19/Noida arising out of the appeal before it against the order dated 06.11.2017 passed u/s 147/144 of the Income Tax Act, 1961 (hereinafter ITA No.1573/Del/2020 2 referred to as ‘the Act’) by the ITO, Ward-1(2), Noida (hereinafter referred to as the Ld. AO). 2. On hearing the relevant facts that come up and are necessary to be recorded are that the return for the relevant assessment year was filed by the assessee on 30.03.2011 and the copy of ITR acknowledgement is filed on page no. 1 of the paper book. The case of assessee was reopened by issuance of notice u/s 148 of the Act on 30/03/2017 and the assessment was concluded u/s 147/144 of the Act. 2.1 There was allegedly Non-PAN AIR information with the ld. AO that during the FY 2009-10, the assessee sold a residential property. The details of this transaction have been cited to be property bearing no. C-12, Sector 33, Noida was sold on 23.10.2009 for a consideration of Rs. 1,15,00,000/- and sale proceeds were utilized for construction of another residential house for claiming exemption under section 54 of the Act. The case of assessee is that it was in April 2018, the assessee came to know about the Assessment Order dated 06.11.2017 passed under section 147/144 of the Act. Then assessee collected the certified copy of the order from the office of the Assessing Officer on 27.04.2018. and challenged the same in first appeal. The Ld. CIT(A) granted the benefit of indexed cost of acquisition to the assessee and reduced the amount of capital gain to 30,03,599/- but did not allow the claim of exemption from capital gains made under section 54 of the Act by the assessee. Therefore, granted the partial relief to the assessee. As for same assessee is in appeal raising grounds ITA No.1573/Del/2020 3 on merits. However, on 13/04/2022 following additional grounds have been raised:- “1. That the assessee was never served upon with the notice issued by the Ld. Assessing Officer under section 148 of the Act and therefore the consequential assessment made under section 144/147 of the Act is invalid and void-ab-initio. 2. That the reasons to believe recorded by the Ld. Assessing Officer are factually incorrect and recorded by the Ld. Assessing Officer without application of mind. 3. That the approval granted by the competent authority under section 151 of the Act before reopening the assessment was mechanical and without application of mind.\" 3. At the outset we find there is delay of 24 days in filing the appeal and we condone the same giving benefit of COVID-19 pandemic and the Hon'ble Supreme Court’s order dated 23rd March, 2020, in Suo-Moto Writ Petition (Civil) No(s). 3/2020, which extended the period of limitation in respect of filing petitions/applications/suits/ appeals/all other proceedings. 4. During hearing the ld. AR has first argued on the legal ground and considering that same goes to the root of assumption of jurisdiction and can be decided on basis of facts available on record, the additional ground is admitted and adjudicated here in after. 5. As with regard to first additional ground, the Ld. AR has submitted that on the impugned assessment order the address of assessee is mentioned as C-12. Sector-33. Noida, and perhaps sent by the Assessing Officer at the same address ITA No.1573/Del/2020 4 through post. Ld. AR has submitted that this very property is the subject of addition of Rs. 90,00,000/- on account of capital gain and on the same property the order was sent. Ld. AR has submitted that the assessee having come to know of the exparte assessment filed an RTI application to get the copy of all notices and other letters issued by the Ld. Assessing Officer during the course of assessment proceedings. The assessee received copies of notices in response to the RTI and found that all the notices/communications including notice under section 148 of the Act was issued on C-12 Sector 33. Noida - Distt Gautam Buddha Nagar. i.e. at the same property which has been sold by the assessee. 6. As with regard to the additional ground that notice under section 148 was not issued at correct address thus not served on the assessee the ld. AR has submitted that it is settled law that mere issuance of notice under section 148 for reopening of assessment is not sufficient, service thereof to the assessee is mandatory. The assessee was never served with the notice issued under section 148 by the Ld. AO. Since the assessment was made ex-parte and the assessee never participated in the proceedings, the assessee did not get the opportunity to raise this ground before the Ld. AO. 7. Though Ld. DR has defended the issue and has submitted that it is not a case of non-issuance or non-service of notice. However, in contrast to his contention we will like to observe that the mandate of Section 148(1) of the Act is that, reassessment shall not be made until there has been service of notice, which is a condition precedent to making an order of assessment. The servic3 ITA No.1573/Del/2020 5 means service in accordance with law. Revenue cannot dispute that for reopening of assessment under section 147 the Act, issuance of notice is mandatory requirement and without same assumption of jurisdiction is vitiated. Further, in numerous decisions jurisdictional High Court and Tribunal has held that reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed. We rely on decision of Hon'ble High Court of Delhi in the case of CIT Vs. Chetan Gupta [382ITR 613], where Hon’ble High Court has concluded that: \"(i) Under Section 148 of the Act, the issue of notice to the Assessee and service of such notice upon the Assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements, (ii) For the AO to exercise jurisdiction to reopen an assessment, notice under Section 148 (l)has to be mandatorily issued to the Assessee. Further the AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282 (1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC (iii) Although there is change in the scheme of Sections 147,148 and 149 of the Act from the corresponding Section 34 of the 1922 Act, the legal requirement of service of notice upon the Assessee in terms of Section 148 read with Section 282(1)) and Section 153 (2) of the Act is a jurisdictional pre-condition to finalizing the reassessment (iv) The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus, (v) The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act (vi) Reassessment proceedings finalised bv an AO without effecting proper service of notice on the Assessee under Section 148 (l) of the Act are invalid and liable to be quashed.\" ITA No.1573/Del/2020 6 7.1 Hon'ble High Court of Delhi in CIT Vs. Mani Kakkar [178 Taxman 315] has held that: “3. We have heard the learned counsel for the appellant as well as the counsel for the respondent, who is present on advance notice. We find that the factual position is that no notice whatsoever was served on the assessee prior to the re-opening of the assessment proceedings. Proceedings under section147 of the said Act cannot be initiated without the service of notice as provided in section 148 of the said Act The service of notice is a pre-condition for framing an assessment order under section 147. The learned counsel for the appellant sought to place reliance on the provisions of section 292BB of the said Act which has been introduced with effect from 1-4-2008. However, we feel that no reliance on that provision can be placed for two reasons. The first reason being that the said provision is not applicable to the assessment year 2001-02. The second reason being that this argument was not at all being raised before the Tribunal. In fact, the argument could not have been raised before the Tribunal because the amendment itself was introduced subsequent to the passing of the order, which is impugned herein.” 7.2 Reliance can also be placed on the decision of Hon'ble High Court of Delhi in Veena Devi Karnani Vs. ITO [410ITR 23], where hon’ble high court has held that: “5. Rule 127(2) clearly states that the addresses to which a notice or summons or requisition or order or any other communication may be delivered or transmitted shall be either available in the PAN database of the assessee or the address available in the income tax return to which the communication relates or the address available in the last income tax return filed by the assessee - all these options have to be resorted to by the concerned authority - in this case the AO. Therefore, in the facts of this case when the AO issued the reassessment notice, as he did on 13.12.2013 - he was under a duty to access the available PAN data base of the addressee or the address available in the income tax return to which the communication related or the address available in the last income return filed by the addressee. The returns for A. Y. 2011-12 and 2012-13 had already been filed on 22.02.2012 and 13.12.2012 respectively, reflecting the changed address but with the same PAN and before the same AO. The AO omitted to access the changed PAN database and going by the explanation of the Revenue, he merely mechanically sent notices at the old address. Even after issuing the reassessment notice, all succeeding notice under Section 142(1) were sent to the old address. It was in these circumstances that the reassessment was completed on best judgment basis.” ITA No.1573/Del/2020 7 8. Now coming to the facts of the case, on perusal of notice issued under section 148 of the Act and the Assessment Order, we find that, the Ld. AO issued notice on the same property which was sold by the assessee and on which the Ld. AO himself computed capital gain. The fact that ld. AO knows this property has been sold by the assessee is evident from the Assessment Order itself wherein para 2 it is mentioned that \"On perusal of sale deed, it was found that the assessee has sold residential plot for Rs. 1,15,00,000/- on 25.01.2010”. 9. Then we find substance in the contention of ld. AR that ld. AO seems to have not gone through the income tax returns filed by the assessee. In this context it appears to us that as ld. AO considered it to be a case of re-opening based on Non-PAN AIR Information, so he did not take recourse to the records. However, it is established that the assessee in the return of income filed for the AY 2010-11 has changed his address to A-19, Batla Apartments, I.P. Extension and from AY 2011-12 onwards, the assessee is continuously showing his address B-2, Sector-57, Noida, Uttar Pradesh. Referring to page no. 59-63A of the paper book ld Ar has established that the same address is also updated in his PAN database. Further, on perusal of reasons to believe, we observe that the address of the assessee in the reasons to believe is mentioned as \"C-12, Sector- 33, Noida\", which is completely incorrect. 10. There is thus substance in the contention of ld. AR that ld. AO has not taken recourse as per provisions of the Act and the Rules. In this context we find that as per sub-rule (1) of Rule 127, for the purposes of subsection (1) of ITA No.1573/Del/2020 8 section 282, the addresses to which a notice or a summons, etc. may be delivered or transmitted, shall be as per the sub-rule (2). Clause (a) of sub-rule (2) of Rule 127 includes four sources of address for such transmission. First one being the address available in PAN database of the addressee. The Ld. AO did not even consider the address available at the PAN database for proper service of notice. In fact, second proviso to sub rule (2) of rule 127 provides that if the communication cannot be delivered to the address mentioned at sub rule (1), it can be delivered to the address available with the banking company, post office, insurance company, records of the Government, local authority or furnished in form 61,61A. The Ld. AO did not even choose to make any enquiry for proper and valid delivery of notice as per the law. 11. It is settled proposition of law that the onus is on the Revenue to establish that proper service of notice has been affected under section 148 of the Act which is a jurisdictional precondition to finalize the re-assessment. Hon'ble High Court of Delhi in the case of CIT Vs. Rajesh Kumar Sharma [311 ITR 235] has held that; \"It was submitted by learned counsel for the revenue that the envelope did not return with any remark to the effect that it was undelivered and so it must be presumed that it was actually served upon the assessee. 11. We are not in position to make any such assumption because of the categorical stand of the assessee that he had not received the notice. The. burden was entirely upon the revenue to show that the notice was dispatched to the correct address. It is only then that such a presumption could have been made. But learned counsel for the revenue has not been able to show that the envelope containing the notice was correctly addressed. We are, therefore, not inclined to accept this contention of learned counsel for the revenue.\" ITA No.1573/Del/2020 9 12. However, the revenue has failed to discharge its burden and assessee has established that at time of issuance of notice there was non application of mind. The notice was issued, but it seems that was a mere formality. Such issuance of notice, which when issued, is known to be not possible to reach the hands of assessee, cannot be considered to be even issued. 13. Now coming to the additional ground no. 2 that reasons to believe recorded by the Id. AO are factually incorrect and contains serious grave errors and are without any prior verification and shows complete non application of mind, the ld. AR has submitted that in the reasons to believe recorded by the Ld. AO copy of which is provided to us at page no. 6 of the paper book, following factual inaccuracies are recorded: a. Address of the assessee is mentioned as C-12, Sector-33, Noida – Incorrect. b. It is mentioned that PAN is not available. c. Ld. AO mentioned that the assessee has neither filed any return of income while the assessee is regular in filing his return of income. Copies of some of the returns filed by him are filed before us at page no. 1 and 59-63A of the paper book. 14. In this context on the basis of our dissuasion qua earlier ground and aforesaid discrepancy cited, we are of view that the reopening is based on consideration of facts which are incorrect and same establish that there was no ITA No.1573/Del/2020 10 effort of the ld. AO to verify any fact as was available with him in the Non-Pan Information and same was accepted without any perusal of records and application of mind The Id, AO assumed that the assessee does not have PAN and he did not file any of his return and therefore without going through the return of income of the assessee and without verifying the fact whether the income which in the opinion of Ld. AO has escaped assessment has actually escaped or not, he recorded reasons and issued notice, that too at incorrect address. He did not even care to go through the PAN database of the assessee and the records with the department. 15. A co-ordinate bench was confronted with similar set of facts in the case of Hafizuddin Hazi (ITA No. 3690/D/2021) vide order dated 16/02/2022, as the case was reopened on the factually incorrect premise that the assessee had not filed his return of income and therefore, the income has escaped assessment. The reopening was quashed by holding as under: \"We find, the assessee, in the instant case, had filed the original return of income on 31.10.2006 declaring the total income at Rs.10,87,058/- which was processed accordingly. We find, the AO reopened the assessment on the ground that the assessee has purchased residential property amounting to Rs.31,50,000/- and the same is not verifiable from the return of income filed for the A Y 2006-07 and the assessee has not furnished the return of income. The reasons of such reopening has already been reproduced in the preceding paragraph. From the above, it is clear that the reopening was made on the ground that the assessee has not filed the return of income and, therefore, the income to the extent of Rs.31,50,000/- has escaped assessment Since the assessee has already filed the return of income, a fact brought on record by the AO himself in the body of the assessment order itself, therefore, the very reason for which the case of the assessee was reopened is factually incorrect ITA No.1573/Del/2020 11 20. It has been held in various decisions that when the AO reopened the case of the assessee on the premise that the return was not filed as per the database of the Department although it was already filed, then, such reassessment proceedings are not in accordance with the law and has to be quashed. For this proposition, we rely on the decision of the Hon’ble Delhi High Court in the case of PCIT vs. RMG Polyvinyal (I) Ltd. (supra), and the decision of the Hon'ble Gujarat High Court in the case of Vijay Haishchandra Patel vs. ITO (supra) relied on by the Id. Counsel for the assessee. The various other decisions relied on by the Id. Counsel on this issue also support his case to the proposition that when reopening was based on the premise that the assessee has not filed his return of income as per database of the Department, but, the assessee has actually filed the return of income, then, such reopening is not in accordance with the law and has to be quashed since such reopening was based on wrong facts. We, therefore, quash the reassessment proceedings initiated by the AO and subsequent proceedings are accordingly quashed. Since the assessee succeeds on this legal ground, the various other grounds challenging the reopening of the assessment as well as addition on merit become academic in nature and, therefore, are not being adjudicated.\" 16. Thus we are of the firm view that the ld. AO had invoked his jurisdiction for reopening assessment u/s 147/148 of the Act on basis of incorrect facts and non application of mind and also ld. AO failed to serve the mandatory notice as per law. Thus we sustain both the additional grounds. Consequently the appeal is allowed and impugned assessment order is quashed. Order pronounced in the open court on 10.01.2025. Sd/- Sd/- (SHAMIM YAHYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 10th January, 2025. dk ITA No.1573/Del/2020 12 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "