Darshna Mittal, Ludhiana V. ITO-Ward-6(1), Ludhiana

ITA 1139/CHANDI/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7977 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-08-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 14-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Accommodation entries; Assessment record; Reassessment proceedings; Set aside; Capital Gains
• Section: 143(3); 142(1); 250; 143(2); 48; 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A, CHANDIGARH BEFORE: SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER . / ITA NO.1138/CHD/2019 / ASSESSMENT YEAR : 2011-12 DAISY MITTAL, H.NO.308, AGGAR NAGAR, LUDHIANA. THE I.T.O., WARD-6(1), LUDHIANA. ./ PAN NO: AJCPM8692G /APPELLANT /RESPONDENT & . / ITA NO.1139/CHD/2019 / ASSESSMENT YEAR : 2011-12 DARSHNA MITTAL, 939, SHERPUR ROAD, LUDHIANA. THE I.T.O., WARD-6(1), LUDHIANA. ./ PAN NO: ABMPM1337R /APPELLANT /RESPONDENT ! ' /ASSESSEE BY : SHRI SARBJIT GARG, CA $ ' / REVENUE BY : SMT.MEENAKSHI VOHRA, ADDL.CIT ' !' /DATE OF HEARING : 05.08.2021 ' !' /DATE OF PRONOUNCEMENT: 27.08. 2021 (HEARING THROUGH WEBEX) /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : THE ABOVE APPEALS HAVE BEEN PREFERRED BY THE DIFFER ENT ASSESSEES AGAINST THE SEPARATE ORDERS OF THE COMMIS SIONER OF INCOME TAX (APPEALS)-3, LUDHIANA BOTH DATED 01.05.2 019 RELATING TO ASSESSMENT YEAR 2011-12, PASSED U/S 250 (6) OF THE OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS ACT). ITA NOS.1138 & 1139/CHD/2019 A.Y. 2011-12 PAGE 2 OF 7 2. AT THE OUTSET IT WAS POINTED OUT THAT THE ISSUE INVOLVED IN BOTH THE APPEALS WAS IDENTICAL ARISING IN THE BA CKDROP OF IDENTICAL FACTS AND CIRCUMSTANCES. THAT IN BOTH THE SETS OF APPEALS THE CASE OF THE ASSESSEE HAD BEEN REOPENED BY THE AO HAVING INFORMATION FROM ADIT(INVESTIGATION)-2, LUDH IANA, THAT A SURVEY ACTION WAS CONDUCTED BY THE DIT(INVESTIGAT ION), KOLKATA ON VARIOUS SHARE BROKERS DURING WHICH THE S HARE BROKERS ACCEPTED THEIR ROLE IN THE ENTIRE SCAM OF P ROVIDING ACCOMMODATION ENTRIES OF BOGUS LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL LOSS IN CASE OF PENNY STOCK COMPANY M/S TWENTY FIRST CENTURY INDIA LIMITED. IT TRANSPI RED THAT BOTH THE ASSESSEES HAD SOLD SHARES OF THIS COMPANY DURING THE IMPUGNED YEAR AND HAD RETURNED EXEMPTED LONG TERM CAPITAL GAINS U/S 10(38) OF THE ACT. ACCORDINGLY, ASSESSMEN T IN BOTH THE CASES WAS COMPLETED BY TREATING THE LONG TERM C APITAL GAINS AS THE OWN INCOME OF THE ASSESSEE FROM UNDISC LOSED SOURCES. THE ASSESSEE IN BOTH THE CASES CHALLENGED THE ASSESSMENT SO FRAMED ON BOTH LEGAL GROUNDS AS WELL AS ON THE MERITS OF THE CASE WHICH WAS DISMISSED BY THE L D.CIT(A) BY SEPARATE ORDERS PASSED AND AGAINST THE SAME THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. BOTH THE APPEALS A CCORDINGLY WERE TAKEN UP FOR HEARING TOGETHER. 3. BEFORE US THE ARGUMENTS WERE MADE FIRST VIS--VI S THE LEGAL GROUNDS AND ONE OF THE GROUNDS CHALLENGING TH E VALIDITY ITA NOS.1138 & 1139/CHD/2019 A.Y. 2011-12 PAGE 3 OF 7 OF THE ASSESSMENT SO FRAMED RELATED TO NON-ISSUANCE OF NOTICE U/S 143(2) IN THE RE-ASSESSMENT PROCEEDINGS. A PERU SAL OF THE ASSESSMENT RECORD, WHICH WAS PLACED BEFORE US BY TH E LD.DR, REVEALS NO MENTION OF NOTICE U/S 143(2) OF THE ACT BEING ISSUED AFTER THE ASSESSEE FILED RETURN IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. THE ORDER SHEET ENTRIES IN TH E ASSESSMENT RECORD/FILE RELATING TO BOTH THE CASES W AS NOTED BY US TO BE IDENTICAL RECORDING THE ASSESSEE TO HAVE F ILED RETURN ON 27.04.2017 IN RESPONSE TO NOTICE U/S 148 OF THE ACT ISSUED TO IT ON 30-03-18. THEREAFTER THE ORDER SHEET RECOR DS NOTICE U/S 142(1) OF THE ACT BEING ISSUED ON 02.07.2018 AN D THERE IS NO MENTION IN THE ORDERSHEET OF ISSUE OF ANY NOTICE U/S 143(2) OF THE ACT. EVEN THE ASSESSMENT RECORDS DO NOT CO NTAIN ANY NOTICE U/S 143(2) ISSUED TO THE ASSESSEES. IT THER EFORE, APPEARS THAT NO NOTICE U/S 143(2) OF THE ACT WAS IS SUED IN THE RE-ASSESSMENT PROCEEDINGS. 4. IT IS SETTLED LAW THAT ISSUANCE OF NOTICE U/S 14 3(2) OF THE ACT IN RE-ASSESSMENT PROCEEDINGS FOR THE PURPOSE OF MAKING ADJUSTMENTS TO RETURN FILED BY THE ASSESSEE IN RESP ONSE TO NOTICE U/S 148 OF THE ACT IS A MANDATORY REQUIREMEN T. THE SECTION ITSELF MANDATES THIS REQUIREMENT AND EVEN C OURTS HAVE HELD SO. THIS PROPOSITION HAS BEEN LAID DOWN BY TH E HONBLE HIGH COURT OF DELHI IN THE CASE OF PR.CIT & ANR VS SILVER LINE & ANR (2016) 383 ITR 455 (DEL), REFERRING IN THE S AID CASE ITA NOS.1138 & 1139/CHD/2019 A.Y. 2011-12 PAGE 4 OF 7 NUMBER OF DECISIONS LAYING DOWN THE SAID PROPOSITIO N OF LAW AS UNDER: ON THE QUESTION OF WHETHER THE NOTICE UNDER SECTIO N 143(2) OF THE ACT WAS IN THE FACTS AND CIRCUMSTANCES MANDATOR Y, MR. SAHNI SOUGHT TO DISTINGUISH THE LONG LINE OF DECISI ONS INCLUDING THE RECENT DECISION OF THIS COURT IN PR. CIT V. SHRI JAI SHIV SHANKAR TRADERS PVT. LTD. (SUPRA) ON THE GROUND THAT THERE WAS NO OCCASION FOR THE AO TO ISSUE ANY NOTICE UNDE R SECTION 143 (2) OF THE ACT SINCE THE ASSESSEE HAD, IN FACT, NOT FILED A RETURN. HE SUBMITTED THAT THE ORIGINAL RETURN WAS F ILED IN THE 'SARAL FORM' WHICH HAD SINCE BEEN REPLACED WITH A D IFFERENT FORM FOR FILING OF RETURNS. CONSEQUENTLY, THE SAID RETUR N COULD NOT HAVE BEEN TREATED AS A RETURN FILED PURSUANT TO THE NOTI CE ISSUED TO THE ASSESSEE UNDER SECTION 148 OF THE ACT. HE FURTH ER SUBMITTED THAT WITH NO DISCREPANCY HAVING BEEN FOUND BY THE A O IN THE RETURNS FOR AYS 2005-06 TILL 2007-08, WHICH WERE PR OCESSED UNDER SECTION 143 (1) OF THE ACT, THERE WAS NO OCCA SION FOR THE AO TO ISSUE A NOTICE UNDER SECTION 143 (2) OF THE A CT. MR. SAHNI SUBMITTED THAT IN THE CIRCUMSTANCES, THE ACTION OF THE AO IN FINALISING THE REASSESSMENT ORDERS WITHOUT NOTICE U NDER SECTION 143 (2) OF THE ACT WAS JUSTIFIED. 18. THE WORDING OF SECTION 143(2)(II) OF THE ACT, W HICH IS APPLICABLE IN THE PRESENT CASE, REQUIRES THE AO TO BE SATISFIED ON EXAMINING THE RETURN FILED THAT PRIMA FACIE THE ASS ESSEE HAS UNDERSTATED THE INCOME OR HAS COMPUTED EXCESSIVE LOSS OR HAS UNDERPAID THE TAX IN ANY MANNER. THE AO HAS THE D ISCRETION TO ISSUE A NOTICE UNDER SECTION 143 (2) IF HE CONSIDER S IT NECESSARY OR EXPEDIENT TO DO SO. THIS EXERCISE BY THE AO UND ER SECTION 143 (2) OF THE ACT IS QUALITATIVELY DIFFERENT FROM THE ISSUANCE OF A NOTICE UNDER SECTION 142(1) OF THE ACT, WHICH AS NO TED HEREINBEFORE, IS IN A STANDARD PROFORMA. 19. THE COURT IS UNABLE TO ACCEPT THE SUBMISSION OF THE REVENUE THAT IN THE PRESENT CASE, NO RETURN WAS FIL ED BY THE ASSESSEE PURSUANT TO THE NOTICE ISSUED TO IT UNDER SECTION 148 OF THE ACT. IF AFTER RECEIVING THE LETTER DATED 1ST AP RIL 2011 OF THE ASSESSEE THE AO WAS OF THE VIEW THAT THE RETURN ORI GINALLY FILED IN THE SARAL FORM COULD NOT BE TREATED AS THE RETUR N PURSUANT TO THE NOTICE UNDER SECTION 148 OF THE ACT, THEN HE SH OULD HAVE DRAWN THE ATTENTION OF THE ASSESSEE TO THAT FACT. I N THE PRESENT CASE ALL THAT THE AO DID WAS TO SEND A NOTICE UNDER SECTION 142 (1) OF THE ACT. THE ASSESSEE WAS NOT MADE AWARE AS TO WHY HE WAS REQUIRED TO FILE A RETURN. HAD A NOTICE BEEN IS SUED TO HIM UNDER SECTION 143 (2) OF THE ACT, THE AO WO ULD HAVE BEEN ITA NOS.1138 & 1139/CHD/2019 A.Y. 2011-12 PAGE 5 OF 7 OBLIGED TO LET THE ASSESSEE KNOW WHY HE WAS BEING A SKED TO FILE A RETURN NOTWITHSTANDING HIS LETTER DATED 1ST APRIL 2011. IN THE CIRCUMSTANCES, THE ASSESSEE WAS JUSTIFIED IN PROCEE DING ON THE BASIS THAT IT HAD NOT COMMITTED ANY DEFAULT IN COMM UNICATING TO THE AO THAT THE RETURN ALREADY FILED SHOULD BE TREA TED AS THE RETURN FILED PURSUANT TO THE NOTICE UNDER SECTION 1 48 OF THE ACT. 20. THE PROPOSAL TO REOPEN AN ASSESSMENT UNDER SECT ION 147 OF THE ACT IS TO BE BASED ON REASONS TO BE RECORDED BY THE AO. SUCH REASONS HAVE TO BE COMMUNICATED TO THE ASSESSE E. HOWEVER, MERELY BECAUSE THE ASSESSEE PARTICIPATES I N THE PROCEEDINGS PURSUANT TO SUCH NOTICE UNDER SECTION 1 48 OF THE ACT, IT DOES NOT OBVIATE THE MANDATORY REQUIREMENT OF THE AO HAVING TO ISSUE TO THE ASSESSEE A NOTICE UNDER SECT ION 143(2) OF THE ACT BEFORE FINALISING THE ORDER OF THE REASSESS MENT. 21. IN THIS CONTEXT REFERENCE MAY BE MADE TO THE DE CISION OF THE MADRAS HIGH COURT IN SAPTHAGIRI FINANCE & INVESTMENTS V. INCOME TAX OFFICER (SUPRA) WHERE AGAIN THE ASSESSEE DID NOT FILE A RETURN PURSUANT TO SECTION 148 OF THE AC T. THE AO THEN ISSUED A NOTICE TO IT UNDER SECTION 142(1) OF THE A CT. THE ASSESSEE THEREAFTER APPEARED BEFORE THE AO AND STAT ED THAT THE ORIGINAL RETURN FILED SHOULD BE TREATED AS THE RETU RN FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT . IN THOSE CIRCUMSTANCES, THE HIGH COURT OBSERVED THAT IF THER E WAS SOME EXPLANATION THAT WAS REQUIRED TO BE OFFERED BY THE ASSESSEE, NOTWITHSTANDING THE ABOVE SUBMISSION MADE BY IT, TH E AO OUGHT TO HAVE ISSUED A NOTICE UNDER SECTION 143(2) OF THE ACT. THE MADRAS HIGH COURT OBSERVED: MERELY BECAUSE THE MATTER WAS DISCUSSED WITH THE ASSESSEE AND THE SIGNATURE IS AFFIXED IT DOES NOT M EAN THE REST OF THE PROCEDURE OF NOTICE UNDER SECTION 143(2 ) OF THE ACT WAS COMPLIED WITH OR THAT ON PLACING THE OBJECT ION THE ASSESSEE HAD WAIVED THE NOTICE FOR FURTHER PROCESSI NG OF THE REASSESSMENT PROCEEDINGS. THE FACT THAT ON THE NOTICE ISSUED U/S 143(2) OF THE ACT, THE ASSESSEE HAD PLAC ED ITS OBJECTION AND REITERATED ITS EARLIER RETURN FILED A S ONE FILED IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT AND THE OFFICER HAD ALSO NOTED THAT THE SAME WOULD BE CONSI DERED FOR COMPLETING OF ASSESSMENT, WOULD SHOW THAT THE A O HAS THE DUTY OF ISSUING THE NOTICE UNDER SECTION 143(3) TO LEAD ON TO THE PASSING OF THE ASSESSMENT. IN THE CIRCUMS TANCES, WITH NO NOTICE ISSUED U/S 143(3) AND THERE BEING NO WAIVER, THERE IS NO JUSTIFIABLE GROUND TO ACCEPT TH E VIEW OF THE TRIBUNAL THAT THERE WAS A WAIVER OF RIGHT OF NO TICE TO BE ISSUED U/S 143(2) OF THE ACT. ITA NOS.1138 & 1139/CHD/2019 A.Y. 2011-12 PAGE 6 OF 7 22. THE DECISIONS OF THE ALLAHABAD HIGH COURT IN COMMISSIONER OF INCOME TAX V. RAJEEV SHARMA (SUPRA) AND COMMISSIONER OF INCOME-TAX-II, LUCKNOW V. SALARPUR COLD STORAGE (P.) LTD. (SUPRA) ALSO REITERATE THE ABOVE LEGAL POSITION. AS FAR AS THIS COURT IS CONCERNED, THE DECISION IN DIRECTOR OF INCOME TAX V. SOCIETY FOR WORLDWIDE INTERBANK FINAN CIAL TELECOMMUNICATIONS (2010) 323 ITR 249 (DEL) AND THE RECENT DECISION IN PR. CIT V. SHRI JAI SHIV SHANKAR TRADERS PVT. LTD. (SUPRA) HOLD LIKEWISE. 23. WITH THE LEGAL POSITION BEING ABUNDANTLY CLEAR THAT A REASSESSMENT ORDER CANNOT BE PASSED WITHOUT COMPLIA NCE WITH THE MANDATORY REQUIREMENT OF NOTICE BEING ISSUED BY THE AO TO THE ASSESSEE UNDER SECTION 143(2) OF THE ACT, THE I TAT WAS IN THE PRESENT CASE RIGHT IN CONCLUDING THAT THE REASS ESSMENT ORDERS IN QUESTION WERE LEGALLY UNSUSTAINABLE. 5. SINCE IN THE PRESENT CASE IT IS FACT ON RECORD T HAT NO NOTICE U/S 143(2) OF THE ACT WAS ISSUED, AFTER RETU RN WAS FILED BY THE ASSESSEE IN RESPONSE TO NOTICE ISSUED U/S 14 8 OF THE ACT, THE ASSESSMENT ORDER FRAMED IN BOTH THE CASES IS NOT SUSTAINABLE IN LAW. THE ORDER SO PASSED BY THE AO I S, THEREFORE, SET ASIDE. 6. THE ASSESSEE BEFORE US HAS RAISED OTHER ARGUMENT S ALSO CHALLENGING THE VALIDITY OF THE ASSESSMENT FRAMED U /S 147 OF THE ACT BUT SINCE WE HAVE SET ASIDE THE ASSESSMENT FOR THE REASONS ABOVE, WE DO NOT DEEM IT NECESSARY TO DEAL WITH THE OTHER ARGUMENTS OF THE ASSESSEE ALSO. 7. THE GROUNDS OF APPEAL RAISED CHALLENGING THE ADD ITION MADE ON MERITS ARE ALSO NOT BEING DEALT WITH BY US HAVING BEEN RENDERED ACADEMIC SINCE THE ASSESSMENT HAS BEE N HELD TO BE INVALID BY US. ITA NOS.1138 & 1139/CHD/2019 A.Y. 2011-12 PAGE 7 OF 7 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEES ARE ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED ON 27 TH AUGUST, 2021. SD/- SD/- (SATBEER SINGH GODARA) (ANNAPURNA GUPTA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED: 27 TH AUGUST, 2021 * * ),' !-./.! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % 0! / CIT 4. % 0! ( )/ THE CIT(A) 5. .12 ! 3 , '3 , 45627 / DR, ITAT, CHANDIGARH 6. 268& / GUARD FILE ), % / BY ORDER,