Late Sh. Raj Kumar Wadhwa through L/H Smt. Usha Wadhwa, Patiala V. DCIT, Circle, Patiala

ITA 1335/CHANDI/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3239 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 31-03-2021
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA
• Keywords: Question of law; Non compliance; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 143(1); 48; 13; 22; 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B, CHANDIGARH , ! ' , $ % & ' ( , ' BEFORE: SMT.DIVA SINGH, JUDICAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.1335/CHD/2019 / ASSESSMENT YEAR : 2008-09 LATE SH.RAJ KUMAR WADHWA THROUGH L/H SMT.USHA WADHWA, PROP. M/S LUCKY TRADERS, LOWER MALL ROAD, PATIALA. THE D.C.I.T., CIRCLE PATIALA. ./PAN NO: AABPW6062H /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI SUDHIR SEHGAL, ADV. ! / REVENUE BY : SHRI ASHOK KHANNA, ADDL.CIT $ /DATE OF HEARING : 31.03.2021 %&'( $ /DATE OF PRONOUNCEMENT: 14.06. 2021 (VIRTUAL COURT) / ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : THE ABOVE APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS )[IN SHORT THE LD.CIT(A)] , PATIALA DATED 15.07.2019 ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 2 OF 20 RELATING TO ASSESSMENT YEAR 2008-09 PASSED U/S 250( 6)) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT (APPEALS), PATIALA HAS ERRED I N CONFIRMING THE ACTION OF THE ASSESSING OFFICER WITH REGARD TO REOPENING OF THE CASE U/S 147 OF THE INCOME TAX ACT AND IN PROCEEDING TO REASSESS THE CASE OF THE APPELLANT. 2. THAT THERE WAS NO REASON TO BELIEVE THAT THE INC OME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND, THEREFORE, THE REOPENING IS BAD IN LAW. 3. NOTWITHSTANDING THE ABOVE SAID FACT, THE ADDITIO N OF RS. 58,58,134/- AS CONFIRMED BY THE LD. CIT(A), HAS BEEN MADE AGAINST THE FACTS AND CIRCUMSTANCES OF TH E CASE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEAR D OR DISPOSED OFF. 3. GROUND NO 1 & 4 BEING GENERAL IN NATURE NEED NO ADJUDICATION. 4. DURING THE COURSE OF HEARING BEFORE US, AT THE O UTSET ITSELF, THE LD.COUNSEL FOR THE ASSESSEE STATED THAT HE WOULD BE MAKING HIS ARGUMENTS ONLY VIS A VIS GROUND NO.2 RAISED, THE REMAINING GROUNDS, IT WAS, STATED BY THE LD.COU NSEL FOR THE ASSESSEE, WERE NOT BEING PRESSED BEFORE US. GRO UND NO.3 RAISED IS ACCORDINGLY DISMISSED AS NOT PRESSED. ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 3 OF 20 5. TAKING UP GROUND NO.2 RAISED, THE LD.COUNSEL FO R THE ASSESSEE CONTENDED THAT VIS--VIS THE IMPUGNED GROU ND THE ASSESSEE HAD SOUGHT TO CHALLENGE THE VALIDITY OF TH E ASSESSMENT FRAMED IN THE PRESENT CASE U/S 147 OF TH E ACT ON THE GROUND THAT THE REASONS RECORDED FOR REOPENI NG OF THE CASE WERE NOT SUFFICIENT FOR FORMING THE BELIEF OF ESCAPEMENT OF INCOME. REFERRING TO THE FACTS OF THE CASE THE L D.COUNSEL FOR THE ASSESSEE POINTED OUT THAT IN THE PRESENT CA SE NOTICE BY THE ASSESSING OFFICER (AO) HAD BEEN ISSUED U/S 148 OF THE ACT FOR ASSUMING THE JURISDICTION TO REASSESS T HE INCOME OF THE ASSESSEE, AS PER THE PROVISIONS OF SECTION 1 47 OF THE ACT ,AND THE REASONS RECORDED FOR REOPENING THE CAS E, HE POINTED OUT FROM THE ASSESSMENT ORDER, WERE AS UNDE R: THE CASE WAS PROCESSED U/S 143(1) OF THE INCOME TA X ACT ON 26/03/2009 AT AN INCOME OF RS.12,49,340/-(PL US AGRICULTURAL INCOME OF RS.2,15 , 250/- FOR RATE PURPOSE). ON GOING THROUGH THE TRADING AND PROFIT & LOSS ACCO UNT OF THE ASSESSEE IT REVEALS THAT THE ASSESSEE HAS SHOWN LIASONING RECEIPTS OF RS.10,74,196/- (NET) ONLY. DURING THE COURSE OF ASSESSMENT PROCEEDING FO R ASSESSMENT YEAR 2006-07, THE ASSESSEE HAS STATED TH AT LIASONING COMMISSION IS FROM M/S SARAVSHAKTIMAN TRA DERS PRIVATE LIMITED AND THE FIGURES REPORTED IN PROFIT & LOSS ACCOUNT ARE NET OF THE EXPENSES INCURRED BY THE ASS ESSEE FOR RENDERING SERVICES BY THE SUB-AGENTS/ SERVICE P ROVIDERS. BUT THE EXPENSES SO CLAIMED BY THE ASSESSEE WERE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSE SSEE TO THE TUNE OF RS.41,14,518/-. THOUGH, THE SAME HAV E BEEN DELETED BY THE LD. CIT(A), BUT THE DEPARTMENT HAS N OT ACCEPTED THE ORDER OF THE CIT(A). THEREFORE IN ORDE R TO SAFEGUARD THE INTEREST OF REVENUE AND KEEPING IN VI EW THE ABOVE DISCUSSION, I HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT ON THE ISSUE OF ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 4 OF 20 LIASONING COMMISSION. SIMILARLY, AN ADDITION OF RS. 3,02,600/- WAS MADE BY THE ASSESSING OFFICER ON ACC OUNT OF LOW HOUSEHOLD EXPENSES SHOWN BY THE ASSESSEE DUR ING ASSESSMENT YEAR 2006-07 BY ESTIMATING MONTHLY EXPEN SES OF RS.35,000/- OF THE ASSESSEE'S FAMILY. THE SAME H AS BEEN CONFIRMED BY THE LD. CIT(A) VIDE ORDER DATED 30/04/2009. THE ISSUE REQUIRES TO BE EXAMINED IN TH IS YEAR ALSO IN THE LIGHT OF THE FINDING GIVEN BY THE LD. C IT(A), AS ABOVE. ACCORDINGLY KEEPING IN VIEW THE ABOVE DISCUSSION, I HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSES SEE HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE INCOME TAX ACT, 1961. ISSUE NOTICE U/S 148 OF T HE INCOME TAX ACT, 1961.' 6. REFERRING TO THE AFORESTATED REASONS, THE LD.COU NSEL FOR THE ASSESSEE CONTENDED THAT IT IS CLEARLY EVIDE NT FROM THE ABOVE THAT THE AO HAD NO REASON AT ALL FOR FORMING ANY BELIEF OF INCOME HAVING ESCAPED IN THE CASE OF THE ASSESSEE. DRAWING OUR ATTENTION TO THE FIRST PARA OF THE REAS ONS HE POINTED OUT THAT THE AO HAD REFERRED TO INCOME HAVI NG ESCAPED ON ACCOUNT OF ALLOWANCE OF EXPENSES CLAIME D BY THE ASSESSEE AGAINST LIAISONING RECEIPTS, WHICH HAD BEE N DISALLOWED IN ASSESSMENT PROCEEDINGS FOR EARLIER AS SESSMENT YEAR I.E. A.Y 2006-07. THE LD.COUNSEL FOR THE ASSES SEE POINTED OUT THAT THE AO IN THE SAME REASON AND IN T HE SAME PARAGRAPH HAS NOTED THE FACT THAT THE SAID DISALLOW ANCE FOR ASSESSMENT YEAR 2006-07 HAD STOOD DELETED BY THE CI T(A), BUT DESPITE BEING IN THE KNOW OF THE SAID FACT HE H AD PROCEEDED TO RECORD THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT ON ACCOUNT OF IMPUGNED EXPENSES ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 5 OF 20 HAVING BEEN ALLOWED TO THE ASSESSEE. HE POINTED OUT THAT THE AO HAD NOTED THAT SINCE THE DEPARTMENT HAD NOT ACCE PTED THE ORDER OF THE CIT(A), THEREFORE, HE HAD REASON T O BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT. THE LD.COUN SEL FOR THE ASSESSEE CONTENDED THAT CLEARLY WHEN THE INFORMATION ON THE BASIS OF WHICH THE AO HAD FORMED THE BELIEF OF ESCAPEMENT OF INCOME NO LONGER SURVIVED ,HAVING BEEN DELETED BY THE CIT(A), THERE POSSIBLY COULD N OT HAVE BEEN ANY INFORMATION LEADING TO THE FORMATION OF B ELIEF OF ESCAPEMENT OF INCOME ON THIS ACCOUNT. THEREAFTER R EFERRING TO THE SECOND PARA OF THE REASONS HE POINTED OUT TH AT BASED ON THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07 WHEREIN CERTAIN ADDITIONS HAD BEEN MADE BY ESTIMATI NG HOUSEHOLD EXPENSES OF THE ASSESSEE, THE AO HAD NOT ED THAT THIS ISSUE REQUIRED EXAMINATION IN THE IMPUGNED YEA R ALSO SINCE THE CIT(A) HAD CONFIRMED THE SAME IN THE EARL IER YEAR AND FOR THIS REASON, HE DERIVED, THAT THE INCOME HA D ESCAPED ASSESSMENT. THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT EVEN THE AO WAS NOT SURE WHETHER THERE WAS AN Y UNACCOUNTED HOUSEHOLD EXPENSES HAVING NOTED THAT TH E MATTER NEEDED ENQUIRY, SO HOW COULD THERE POSSIBLY BE ANY FORMATION OF BELIEF OF ESCAPEMENT ON THIS COUNT. TH E LD.COUNSEL FOR THE ASSESSEE STATED THAT IT WAS OBVI OUS THAT THERE WAS NO INFORMATION AT ALL IN THE POSSESSION O F THE AO ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 6 OF 20 FOR THE FORMATION OF BELIEF OF ESCAPEMENT OF INCOME EITHER ON ACCOUNT OF CLAIM OF EXPENSES AGAINST LIAISONING REC EIPTS OR ON ACCOUNT OF UNACCOUNTED HOUSEHOLD EXPENSES AND, THEREFORE, ASSUMPTION OF JURISDICTION TO REOPEN THE CASE OF THE ASSESSEE U/S 147 OF THE ACT, WAS BAD IN LAW AND THE ORDER PASSED AS A CONSEQUENCE THEREOF NEEDED TO BE QUASHED. THE LD.COUNSEL FOR THE ASSESSEE REFERRED T O THE FOLLOWING DECISIONS IN SUPPORT: 1) CIT VS. ORIENT CRAFT LTD., 354 ITR 536 (DEL) 2) M/S AMIT ENGINEERING VS. ACIT, 156 ITD 556 (CHD.TRIB.) 3) M/S SAMART PLYWOOD LTD. VS. ACIT IN ITA NO.514/CHD/2017 FOR A.Y.2008-09 7. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED UP ON THE ORDER OF THE CIT(A). HE DREW OUR ATTENTION TO THE F INDINGS OF THE CIT(A) AT PAGE 9 OF HIS ORDER AS UNDER: THAT THE APPELLANT HAD IN ASSESSMENT YEARS 2006-0 7 AND 2007-08 FOLLOWED AN ACCOUNTING METHODOLOGY WHER EBY HE HAD CREDITED LIAISON INCOME NET OF EXPENSES IS A MA TTER OF RECORD AND NOT IN DISPUTE. THAT ADDITIONS IN EARLIE R YEARS HAD BEEN MADE AFTER DUE INVESTIGATION AND ON THE BA SIS OF FINDINGS THAT THE EXPENSES WERE BOGUS/ INFLATED. DU RING THE PROCESS OF REOPENING THE LD. AO WOULD HAVE HAD ACCE SS TO THE DEPARTMENTAL COMPUTER SYSTEMS WHERE BOTH IN THE AST APPLICATION AND IN THE E-FILING AO PORTAL ALL OF WH ICH SHOW THE DETAILS OF E-FILED RETURNS/AUDIT REPORTS ETC. I T IS MY CONSIDERED VIEW THAT LD. AO HAD ADEQUATE INFORMATIO N ON RECORD TO HAVE REASON TO BELIEVE THAT THE APPELLANT HAD USED THE SAME ACCOUNTING METHODOLOGY AND THAT THE EXPENSES F OR THE LIAISON INCOME WOULD HAVE BEEN, LIKE EARLIER YEARS, PRIMA-FACIE BOGUS/INFLATED. THE LANGUAGE OF THE LD. AO WHILE RE CORDING ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 7 OF 20 REASONS AND THE CIT (A)'S ORDER DELETING THE ADDITI ON NOTWITHSTANDING; IT IS MY CONSIDERED VIEW THAT THE LD. AO HAD INFORMATION ON RECORD; RECORD INCLUDING CURRENT YEA R AND EARLIER YEAR RECORDS; THAT INCOME OF THE APPELLANT HAD ESCA PED ASSESSMENT. AT THE TIME OF REOPENING THE AO CANNOT DIVINE WHAT WOULD THE EXACT ACCOUNTING PRACTICE AND THE QU ANTUM OF THE EVASION. THE CONSISTENT METHODOLOGY FOLLOWED BY THE APPELLANT, BECOMES, IN MY CONSIDERED OPINION, COGEN T INFORMATION QUA REOPENING OF THE CASE AS THE INFORM ATION THAT LEAD TO THE SUBJECTIVE SATISFACTION IN THE LD AO WH ICH WAS PREDICTED ON COGENT INFORMATION THAT LEAD TO REASON TO BELIEVE. RELIANCE IS PLACED ON THE JUDGMENT OF THE HON'BLE A PEX COURT IN THE CASE OF RAYMOND WOOLLEN MILLS LTD. V. ITO AND O THERS [19991] 236 ITR 34 (SC)/[1999] 152 CTR 418 (SC) WHE RE THE APEX COURT HAS HELD AS UNDER: IN DETERMINING WHETHER COMMENCEMENT OF REASSESSMENT PROCEEDINGS WAS VALID IT HAS ONLY TO BE SEEN WHETHE R THERE WAS PRIMA FADE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY O R CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CO NSIDERED AT THIS STAGE. 8. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO CAR EFULLY GONE THROUGH THE DOCUMENTS REFERRED TO BEFORE US AN D ALSO THE ORDER OF THE LD.CIT(A) & AO. THE PRIMARY CONTE NTION OF THE LD.COUNSEL FOR THE ASSESSEE BEFORE US IS THAT T HE JURISDICTION ASSUMED IN THE PRESENT CASE FOR REOPEN ING THE ASSESSMENT OF THE ASSESSEE U/S 147 OF THE ACT WAS B AD SINCE THE REASONS RECORDED BY THE AO FOR REOPENING THE CA SE DID NOT REVEAL ANY INFORMATION WORTH ITS WHILE BEING IN THE POSSESSION OF THE AO TO FORM THE BELIEF OF ESCAPEME NT OF INCOME. 9. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE. WE HAVE GONE THROUGH T HE ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 8 OF 20 REASONS AS RECORDED BY THE AO AND REPRODUCED IN EAR LIER PART OF OUR ORDER ABOVE. WE HAVE NOTED, THAT THE AO HAS RECORDED HIS BELIEF OF ESCAPEMENT OF INCOME ON TWO COUNTS; I) INCORRECT CLAIM OF EXPENSES AGAINST LIAISONING RECEIPTS AND; II) AGAINST UNACCOUNTED HOUSEHOLD EXPENSES. 10. THE BASIS FOR FORMATION OF BELIEF OF ESCAPEMENT OF INCOME ON THE AFORESAID TWO COUNTS BY THE AO, WE FI ND, RESTS ON THE ASSESSMENT FRAMED IN THE CASE OF THE ASSESSE E ON IDENTICAL ISSUES IN EARLIER ASSESSMENT YEAR, A.Y. 2 006-07 WHEREIN, AS NOTED BY THE AO IN HIS REASONS, EXPENSE S AGAINST LIAISONING RECEIPTS WERE DISALLOWED AND ADD ITION MADE ON ACCOUNT OF HOUSEHOLD EXPENSES. BUT GOING FO RWARD FROM HERE WE FIND THAT IN CASE OF EXPENSES CLAIMED AGAINST LIAISONING RECEIPTS, THE AO ALSO NOTED THE FACT THA T THE DISALLOWANCE MADE OF THE SAME IN ASSESSMENT YEAR 20 06-07 STOOD DELETED BY THE CIT(A). CONSIDERING THE SAID F ACT, UNDOUBTEDLY AT THE TIME OF RECORDING OF REASONS, TH E INFORMATION IN THE POSSESSION OF THE AO WAS, THEREF ORE, THAT THE CLAIM OF THE ASSESSEE OF EXPENSES AGAINST THE L IAISONING RECEIPTS WAS IN ACCORDANCE WITH LAW AND NOT LIABLE TO BE DISALLOWED. THERE ARE NO TWO VIEWS VIS--VIS THIS F ACT. IN THE BACKDROP OF THIS FACT SURELY THERE CANNOT BE ANY FO RMATION ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 9 OF 20 OF BELIEF OF ESCAPEMENT OF INCOME ON ACCOUNT OF CLA IM OF EXPENSES AGAINST LIAISONING RECEIPTS. THE NOTING OF THE AO THAT THE DEPARTMENT HAS NOT ACCEPTED THE ORDER OF T HE CIT(A), AND HENCE, THE FORMATION OF BELIEF OF ESCAP EMENT OF INCOME, WE FIND, IS NOT ACCEPTABLE. THE BELIEF OF E SCAPEMENT OF INCOME IS TO BE BASED ON INFORMATION IN THE POS SESSION OF THE A.O WHICH HAS TO BE READ IN ITS ENTIRETY AND IT CANNOT BE LEFT TO THE DISCRETION OF THE AO TO ACCEPT PART OF THE INFORMATION ALONE, IGNORING THE REST AS PER HIS WHI MS AND FANCIES. IN THE PRESENT CASE, THE INFORMATION AVAIL ABLE WITH THE AO WAS THAT THE CLAIM OF THE ASSESSEE TO LIASON ING EXPENSES INCURRED IN A.Y 2005-06 WAS IN ACCORDANCE WITH LAW, AS PER THE ORDER OF THE FIRST APPELLATE AUTHOR ITY. AND THIS INFORMATION SURELY CANNOT LEAD TO THE FORMATIO N OF BELIEF OF ESCAPEMENT OF INCOME ON ACCOUNT OF ALLOW ANCE OF LIASONING EXPENSES IN THE IMPUGNED YEAR. 11. AS FAR AS THE BELIEF OF ESCAPEMENT OF INCOME ON ACCOUNT OF HOUSEHOLD EXPENSES, WE AGAIN NOTE THAT THERE IS PALPABLY NO INFORMATION IN THE POSSESSION OF THE AO REGARDIN G THE ESCAPEMENT OF ANY SUCH INCOME PERTAINING TO THE IMP UGNED YEAR, ON THIS ACCOUNT. IN FACT, WE FIND, THAT THE AO NOTES IN HIS REASONS THAT THE ISSUE NEEDS TO BE EXAMINED AND HIS FORMATION OF BELIEF, WE FIND, RESTS ON THE FACT THA T SUCH ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 10 OF 20 ADDITION HAD BEEN MADE IN ASSESSMENT OF THE ASSESSE E FOR ASSESSMENT YEAR 2006-07. IT IS THEREFORE ONLY A MER E SUSPICION THAT INCOME ON THIS ACCOUNT MAY HAVE ESCA PED ASSESSMENT AND REOPENING CANNOT BE RESORTED TO ON MERE SUSPICION. THERE HAS BE BELIEF OF ESCAPEMENT OF I NCOME. CLEARLY, THEREFORE, THERE IS NO BASIS FOR FORMATION OF BELIEF OF ESCAPEMENT OF INCOME ON ACCOUNT OF HOUSEHOLD EXPENS ES IN THE IMPUGNED YEAR. IT IS SETTLED LAW THAT REOPENING CANNOT BE RESORTED TO FOR CONDUCTING ANY ROVING AND FISHIN G INQUIRIES AS HAS BEEN SOUGHT BY THE AO WHEN HE NOTE S IN THE REASONS THAT THE ISSUE OF HOUSEHOLD EXPENSES NE EDS EXAMINATION. 12. AS RIGHTLY POINTED OUT BY THE LD.COUNSEL FOR TH E ASSESSEE THE REASONS RECORDED BY THE AO DO NOT DEMO NSTRATE ANY BASIS FOR FORMATION OF BELIEF OF ESCAPEMENT OF INCOME EITHER ON ACCOUNT OF LIAISONING EXPENSES CLAIMED OR UNACCOUNTED HOUSEHOLD EXPENSES. THE REASONS RECORDE D, THEREFORE, WE HOLD DO NOT JUSTIFY THE ASSUMPTION OF JURISDICTION TO REOPEN THE CASE OF THE ASSESSEE U/S 147 OF THE ACT AND THE ORDER PASSED IN CONSEQUENCE THEREOF IS LIABLE TO BE QUASHED. GROUND NO.2 OF THE APPEAL IS ACCORDINGLY ALLOWED. ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 11 OF 20 13. FURTHER VIDE APPLICATION DATED 18.01.2021 THE A SSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPE AL: 1. ' NOTWITHSTANDING THE ABOVE SAID GROUNDS OF APPEAL, THE ASSESSMENT AS FRAMED BY THE ASSESSING OFFICER, IN THE NAME OF 'DEAD PERSON' IS VOID ABINITIO, SINC E THE ASSESSEE CONCERNED DIED ON 21.07.2013 AND, THEREFOR E, COMPLETION OF ASSESSMENT IN THE NAME OF DEAD PERSON IS VOID ABINITIO AND, AS SUCH, THE ASSESSMENT PROCEEDINGS DESERVE TO BE QUASHED.' 2. 'NOTWITHSTANDING GROUNDS OF APPEAL WITH REGARD T O REOPENING OF THE CASE, THE ASSESSMENT HAVING BEEN REOPENED BEYOND FOUR YEARS AND NO PERMISSION FROM T HE JOINT COMMISSIONER OF INCOME TAX/ COMMISSIONER OF INCOME TAX, PATIALA HAVING BEEN TAKEN, BEFORE ISSUANCE OF NOTICE U/S 148 AS PER INSPECTION OF FIL E SOUGHT BY THE ASSESSEE AND, THUS, REOPENING IS BAD IN-LAW.'. 14. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT HE WOULD ONLY BE MAKING HIS ARGUMENTS ON ADDITIONAL GR OUND NO 1 RAISED AND WAS NOT PRESSING THE ADDITIONAL GR OUND NO.2 RAISED. LD COUNSEL FOR THE ASSESSEE TOOK US T HROUGH GROUND NO.1 OF THE ADDITIONAL GROUNDS AND REFERRING TO THE SAME HE STATED THAT IN THE IMPUGNED GROUND THE CHAL LENGE TO THE VALIDITY OF THE ASSESSMENT ORDER SO FRAMED W AS ON THE GROUND THAT THE ASSESSMENT HAS BEEN FRAMED ON A DEA D PERSON, WHICH WAS NOT PERMISSIBLE IN LAW. THE LD.CO UNSEL FOR THE ASSESSEE CONTENDED THAT ALL FACTS RELEVANT FOR ADJUDICATING THE ISSUE WERE BORNE OUT FROM THE RECO RDS AND BEING A LEGAL ISSUE THE GROUND NEEDED TO BE ADMITTE D. HE ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 12 OF 20 RELIED UPON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF NTPC LIMITED VS. CIT, 229 ITR 383 (SC). THE LD. DR DID NOT OBJECT TO THE SAME. 15. ACCORDINGLY, CONSIDERING THAT THE ASSESSEE HA S RAISED A LEGAL ISSUE IN THE ADDITIONAL GROUND OF APPEAL NO .1 BEFORE US AND ADMITTEDLY, ALL FACTS RELEVANT FOR ADJUDICAT ING THE ISSUE ARE BORNE OUT FROM THE RECORDS, THE ADDITIONA L GROUND SO RAISED BY THE ASSESSEE IS BEING ADMITTED FOR ADJ UDICATION. SINCE THE LD.COUNSEL MADE NO SUBMISSIONS FOR ADMISS ION OF ADDITIONAL GROUND NO.2 THE SAME WAS NOT ADMITTED FO R ADJUDICATION. THE ORDER WAS PRONOUNCED IN THE OPEN COURT DURING THE COURSE OF HEARING ITSELF. 16. THEREAFTER PROCEEDING WITH HIS ARGUMENT THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT IN THE F ACTS OF THE PRESENT CASE THE ASSESSEE, LATE SHRI RAJ KUMAR WADHWA, WAS ALIVE WHEN NOTICE U/S 148 OF THE ACT FO R REOPENING OF THE CASE OF THE ASSESSEE WAS ISSUED ON 30-03- 2013. THAT SUBSEQUENTLY THEREAFTER THE ASSESSEE EXP IRED ON 21.07.2013 AND THIS FACT WAS DULY INTIMATED TO THE AO BY THE WIFE OF THE DECEASED, WHO ALSO CLARIFIED THAT S HE WAS THE LEGAL HEIR OF THE ASSESSEE. THAT DESPITE BEING SO I NFORMED THE AO CONTINUED ISSUING NOTICES U/S 142(1) IN THE NAME OF ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 13 OF 20 THE DECEASED ASSESSEE. THE LD.COUNSEL FOR THE ASSES SEE POINTED OUT THAT TWO SUCH NOTICES WERE ISSUED TO TH E ASSESSEE DATED 08.01.2014 AND 18.02.2014. THAT EVEN THE ASSESSMENT WAS FRAMED IN THE NAME OF THE DECEASED ASSESSEE AND DEMAND NOTICE WAS ALSO ISSUED IN HIS N AME. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT IN T HE CASE OF A DECEASED ASSESSEE THE LEGISLATURE HAS PROVIDED FOR THE MANNER IN WHICH THE ASSESSMENT IS TO BE FRAMED, U/S 159 OF THE ACT, AS PER WHICH AFTER THE DEMISE OF THE ASSES SEE ALL PROCEEDINGS ARE TO BE CARRIED ON WITH THE LEGAL HEI R AND THE ASSESSMENT FRAMED IN THE NAME OF THE LEGAL HEIR. IT WAS CONTENDED THAT THE SAID PRESCRIBED PROCEDURE BY LAW HAS CLEARLY NOT BEEN FOLLOWED IN THE PRESENT CASE AND, THEREFORE, ALSO THE ASSESSMENT FRAMED WAS BAD IN LAW, BEING IN THE NAME OF A DEAD ASSESSEE AND THEREFORE LIABLE TO BE QUASHED. THE LD.COUNSEL FOR THE ASSESSEE IN THIS REGARD DREW OUR ATTENTION TO THE SEQUENCE OF EVENTS BRINGING OUT TH E ABOVE FACTS AS UNDER: S.NO. PARTICULARS DATE OF FILING/ISSUING 1. RETURN FILED BY THE ASSESSEE DURING HIS LIFE TIME 27.09.2008 2. RETURN PROCESSED U/S 143(1) 26.03.2009 3. NOTICE U/S 148 ISSUED, PLACED AT PAGE 1 OF THE PAPER BOOK IN THE NAME OF SH.RAJ KUMAR WADHWA. 30.03.2013 4. ASSESSEE DIED ON (DEATH CERTIFICATE PLACED AT PAGE 4 OF THE PAPER BOOK.) 21.07.2013 ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 14 OF 20 5. NOTICE U/S 142(1) ISSUED IN THE NAME OF THE DEAD PERSON FOR 08.01.2014, PLACED AT PAGE 2 OF PAPER BOOK. 06.01.2014 6. LEGAL HEIR FILED REPLY, DATED 08.01.2014 STATING THAT SH.RAJ KUMAR WADHWA DIED AND INTIMATED THE NAME OF LEGAL, ALONGWITH DEATH CERTIFICATE PLACED AT PAGES 3 & 4 OF PAPER BOOK. 8.01.2014 7. THE LEGAL HEIR AGAIN FILED A REPLY AS LEGAL HEIR, AS PER PAGE 5 OF THE PAPER BOOK. 13.01.2014 8. ASSESSING OFFICER AGAIN ISSUED NOTICE U/S 142(1) ALONGITH QUESTIONNAIRE, DATED 18.02.2014 IN THE NAME OF DEAD PERSON DESPITE KNOWING THE NAME OF THE LEGAL HEIR AND NOT BRINGING THE LEGAL HEIR ON RECORD AS PER SECTION 159. (COPY ENCLOSED). 18.02.2014 9. ASSESSMENT ORDER PASSED IN THE NAME OF DEAD PERSON WITHOUT BRINGING ON RECORD THE NAME OF LEGAL HEIR, PAGE 22 OF PAPER BOOK. 28.02.2014 10. DEMAND NOTICE U/S 156 ISSUED IN THE NAME OF DEAD PERSON AS PER PAGE 21 OF THE PAPER BOOK. 28.02.2014 17. COPIES OF DOCUMENTS RELIED UPON BY THE LD.COU NSEL FOR THE ASSESSEE TO SUBSTANTIATE HIS ARGUMENTS WERE ALSO PLACED BEFORE US IN A PAPER BOOK AS UNDER: 1) COPY OF NOTICE DATED 30.03.2013 AS ISSUED U/S 14 8 BY THE BY. COMMISSIONER OF INCOME TAX CIRCLE, PATIALA IN THE NAME OF SH, RAJ KUMAR WADHWA. 2. COPY OF NOTICE DATED 03.01.2014 AS ISSUED U/S 14 2(1} BY THE BY. COMMISSIONERJ OF INCOME TAX CIRCLE, PATI ALA IN THE NAME OF LATE SH. RAJ KUMAR WADHWA. 3. COPY OF LETTER DATED 08.01.2014 ALONGWITH COPY O F DEATH CERTIFICATE TO THE ACIT INTIMATING ABOUT THE DEATH OF SH, RAJ KUMAR WADHWA ON 21.07.2013. ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 15 OF 20 4) COPY OF LETTER DATED 13.01.2014 FURNISHING AUDIT REPORT, BALANCE SHEET, TRADING AND PROFIT AND LOSS ACCOUNT ALONGWITH RELEVANT ANNEXURES SUBMITTED BY SMT. 5) USHA WADHWA LEGAL HEIRS OF SH, RAJ KUMAR WADHWA FOR AY 2008-2009 AS PER RETURN ALREADY FILED ORIGIN AL. 6) COPY OF THE DEMAND NOTICE U/S 156 IN THE NAME OF DEAD PERSON VIDE NOTICE DATED 1 28.02.2014 AND 1 E| PAGE OF ASSESSMENT ORDER U/S 143(3) R.W.S 147 AS PASSED IN , THE NAME OF DEAD PERSON WHICH IS VOID AB-INITIO. 18. FURTHER HE RELIED UPON THE FOLLOWING DECISIONS IN SUPPORT OF HIS ABOVE CONTENTION: 1) CIT VS. DHALUMAL SHYAMUMAL, 276 ITR 62 (MP) 2) HARYANA GRAMIN BANK (NOW SARVA HARYANA GRAMIN BANK) VS. DCIT, 83 ITR (TRIB.) (S.N.) 8(DEL.TRIB.) 3) B.G. SHARMA (DECEASED) VS. ITO, ITA NO.387/MUM/2012 (MUM.TRIB.) 19. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(A) STATING THAT THE SAME WAS ONLY A TEC HNICAL ERROR AND WHICH STOOD CORRECTED IN THE APPELLATE PROCEEDINGS. HE DREW OUR ATTENTION TO THE RELEVANT FINDINGS OF THE LD.CIT(A) AT PAGE 10 OF HIS ORDER AS UNDER: FURTHER THE PASSING OF THE IMPUGNED ORDER U/S 143(3) R/W 147 OF THE ACT IN THE APPELLANTS NAME AND NOT IN THE NAME OF THE ESTATE/LEGAL HEIR IS A TECHNICAL ERROR WHICH HAS BEEN CORRECTED IN TH E APPELLATE PROCEEDINGS. THE APPELLANT FAILS ON THIS GROUND OF APPEAL. IT IS ORDERED ACCORDINGLY. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE ALSO GONE THROUGH ALL THE DOCUMENTS REFERRED TO BEF ORE US ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 16 OF 20 AND ALSO THE ORDERS OF THE AUTHORITIES BELOW. THE C ONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE IS THAT ASSESSME NT IN THE PRESENT CASE IS NOT VALID, HAVING BEEN FRAMED ON A DEAD PERSON ,IN COMPLETE VIOLATION OF THE PROCEDURE PRE SCRIBED IN LAW WHERE AN ASSESSEE IS DECEASED DURING ASSESSMENT PROCEEDINGS . 21. IT IS NOT DISPUTED THAT THE ASSESSEE WAS ALIVE ONLY TILL THE TIME THE JURISDICTIONAL NOTICE U/S 148 OF THE A CT WAS ISSUED TO HIM ON 30-03-2013 AND HAD EXPIRED THEREAF TER ON 21-07-2013, DURING THE PENDENCY OF THE IMPUGNED RE- ASSESSMENT PROCEEDINGS . 22. IN CASES WHERE THE ASSESSEE EXPIRES DURING THE PENDENCY OF THE ASSESSMENT PROCEEDINGS, THE LEGISLA TURE HAS PRESCRIBED THE METHODOLOGY FOR FRAMING ASSESSM ENT U/S 159 OF THE ACT. THE SAME IS BEING REPRODUCED HEREUN DER: LEGAL REPRESENTATIVES. 159. (1) WHERE A PERSON DIES, HIS LEGAL REPRESENTATIVE SHALL BE LIABLE TO PAY ANY SUM WHICH THE DECEASED WOULD HAVE BEEN LIABLE TO PAY IF HE HAD NOT DIED, IN THE LIKE MANNE R AND TO THE SAME EXTENT AS THE DECEASED. (2) FOR THE PURPOSE OF MAKING AN ASSESSMENT (INCLUD ING AN ASSESSMENT, REASSESSMENT OR RECOMPUTATION UNDER SECTION 147 ) OF THE INCOME OF THE DECEASED AND FOR THE PURPOSE OF LEVYING ANY SUM IN THE HANDS OF THE LEGAL REPRESENT ATIVE IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (1), (A) ANY PROCEEDING TAKEN AGAINST THE DECEASED BEFOR E HIS DEATH SHALL BE DEEMED TO HAVE BEEN TAKEN AGAINST ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 17 OF 20 THE LEGAL REPRESENTATIVE AND MAY BE CONTINUED AGAINST THE LEGAL REPRESENTATIVE FROM THE STAGE AT WHICH IT STOOD ON THE DATE OF THE DEATH OF THE DECEASED; (B) ANY PROCEEDING WHICH COULD HAVE BEEN TAKEN AGAI NST THE DECEASED IF HE HAD SURVIVED, MAY BE TAKEN AGAINST THE LEGAL REPRESENTATIVE; AND (C) ALL THE PROVISIONS OF THIS ACT SHALL APPLY ACCO RDINGLY. (3) THE LEGAL REPRESENTATIVE OF THE DECEASED SHALL, FOR THE PURPOSES OF THIS ACT, BE DEEMED TO BE AN ASSESSEE. (4) EVERY LEGAL REPRESENTATIVE SHALL BE PERSONALLY LIABLE FOR ANY TAX PAYABLE BY HIM IN HIS CAPACITY AS LEGAL REP RESENTATIVE IF, WHILE HIS LIABILITY FOR TAX REMAINS UNDISCHARGE D, HE CREATES A CHARGE ON OR DISPOSES OF OR PARTS WITH ANY ASSETS 47 OF THE ESTATE OF THE DECEASED, WHICH ARE IN, OR MAY COME I NTO, HIS POSSESSION, BUT SUCH LIABILITY SHALL BE LIMITED TO THE VALUE OF THE ASSET SO CHARGED, DISPOSED OF OR PARTED WITH. (5) THE PROVISIONS OF SUB-SECTION (2) OF SECTION 161, SECTION 162 , AND SECTION 167 , SHALL, SO FAR AS MAY BE AND TO THE EXTENT TO WHICH THEY ARE NOT INCONSISTENT WITH THE PROVISIONS OF THIS SECTION, APPLY IN RELATION TO A LEGAL REPRE SENTATIVE. (6) THE LIABILITY OF A LEGAL REPRESENTATIVE UNDER T HIS SECTION SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (4) AND SUB- SECTION (5), BE LIMITED TO THE EXTENT TO WHICH THE ESTATE IS CAPABLE OF MEETING THE LIABILITY. 23. AS IS EVIDENT FROM THE ABOVE, THE LEGISLATURE H AS PRESCRIBED U/S 159(2), THAT WHERE AN ASSESSEE EXPIR ES DURING PENDENCY OF PROCEEDINGS, THE PROCEEDINGS HAV E TO BE CONTINUED WITH THE LEGAL HEIR AND ASSESSMENT IS TO BE FRAMED IN THE NAME OF THE LEGAL HEIR. 24. IN THE FACTS OF THE PRESENT CASE, WHICH STAND R ECORDED BY THE AO ALSO IN HIS ASSESSMENT ORDER, THE AO WE F IND HAS FAILED TO FOLLOW THE STATUTORILY PRESCRIBED PROCEDU RE. THAT ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 18 OF 20 DESPITE THE AO BEING DULY INFORMED ON 08-01-2014, T HAT THE ASSESSEE HAD EXPIRED ON 21-07-13 AND THAT HIS WIFE WAS THE LEGAL HEIR, HE CONTINUED THE ASSESSMENT PROCEEDINGS , ISSUING NOTICE U/S 142(1) OF THE ACT ON 18-02-2014, IN THE NAME OF THE DECEASED ASSESSEE, AND FURTHER EVEN WEN T ON TO FRAME THE ASSESSMENT AND ISSUE THE DEMAND NOTICE D ATED 28-02-2014, IN THE NAME OF THE DECEASED ASSESSEE . THE AFORESTATED FACTS STAND NOTED IN THE ASSESSMENT OR DER ITSELF AND HAVE REMAINED UNCONTROVERTED BEFORE US. 25. IT IS EVIDENT THEREFORE THAT THE ASSESSMENT FR AMED IN THE PRESENT CASE IS NOT IN ACCORDANCE WITH LAW . TH E RELIANCE PLACED BY THE LD.COUNSEL FOR THE ASSESSEE ON THE DE CISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE O F DHALUMAL SHYAMUMAL (SUPRA) IS APT, WHEREIN IN IDENT ICAL SET OF FACTS WHERE THE ASSESSEE HAD EXPIRED DURING THE PENDENCY OF ASSESSMENT PROCEEDINGS, WHICH FACT WAS DULY INTIMATED TO THE AO, WHO DESPITE THE SAME, ISSUED N O NOTICE TO THE LEGAL REPRESENTATIVES OF THE ASSESSEE AND FR AMED THE ASSESSMENT IN THE NAME OF THE DECEASED ASSESSEE, TH E HONBLE HIGH COURT HELD THAT THE ORDER SO PASSED WA S A NULLITY HAVING BEEN PASSED AGAINST A DEAD PERSON. T HE HONBLE HIGH COURT HELD THAT THAT IT WAS THE DUTY O F THE AO TO HAVE FOLLOWED THE PROCEDURE PRESCRIBED IN LAW IN SUCH ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 19 OF 20 CASES U/S 159 OF THE ACT. THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT ARE AS UNDER: THIS IS AN IT REFERENCE MADE BY THE ITAT (TRIBUNAL ) UNDER S. 256(1) OF THE IT ACT AT THE INSTANCE OF REVENUE (I. E., CIT) IN RA NO. 119/IND/1998 ARISING OUT OF AN ORDER DT. 6TH MA Y, 1998, PASSED BY TRIBUNAL IN ITA NO. 393/IND/1994 TO THIS COURT FOR ANSWERING FOLLOWING QUESTION OF LAW : 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN ANNULLING THE ASSESSM ENT FRAMED BY THE AO AGAINST A DEAD PERSON WITHOUT BRIN GING THE LRS ON RECORD ?' THE QUESTION IS FOUNDED ON FOLLOWING FACTS AS STATE D IN STATEMENT OF CASE DRAWN BY THE TRIBUNAL. 2. ONE DALUMAL SHYAMUMAL WAS AN ASSESSEE. FOR THE A SST. YR. 1990-91, THE AO PASSED AN ASSESSMENT ORDER ON 2 4TH FEB., 1993 (ANNEX. A), UNDER S. 143(3) OF THE ACT. IT IS NOT IN DISPUTE THAT ASSESSEE HAD EXPIRED PRIOR TO PASSING OF THE ASSESSMENT ORDER. IT IS ALSO NOT IN DISPUTE THAT AO HAD THE KNOWLEDGE OF THE DEATH BECAUSE A LETTER TO THAT EFF ECT WAS SENT TO AO ON 11TH JULY, 1991, I.E., MUCH PRIOR TO PASSING OF ORDER ON 24TH FEB., 1993. IT IS ALSO NOT IN DISPUTE THAT NO NOTICE AS CONTEMPLATED UNDER S. 159 OF THE IT ACT W AS SENT TO ANY OF THE LEGAL REPRESENTATIVES OF ASSESSEE. IN SU CH CIRCUMSTANCES, THE ORDER PASSED BY AO ON 24TH FEB., 1993, BECOMES A NULLITY HAVING BEEN PASSED AGAINST THE DE AD PERSON [SEE CIT VS. AMARCHAND N. SHROFF (1963) 48 I TR 59 (SC) AND ITO VS. RAM PRASAD & ORS. (1972) 86 ITR 14 5 (SC)]. 3. IN A CASE WHERE AN ASSESSEE DIES PENDING ANY ASS ESSMENT PROCEEDINGS, THE PROVISIONS OF S. 159 OF THE ACT GE T ATTRACTED. IT IS THE DUTY OF AO TO ENSURE COMPLIANCE OF SUB-S. (2) OF S. 159 BEFORE ANY ORDERS ARE PASSED. 26. THE NON COMPLIANCE BY THE AO OF THE STATUTORILY PRESCRIBED PROCEDURE, APPLICABLE IN THE FACTS OF TH E PRESENT CASE, CANNOT BE SAID TO BE A MERE TECHNICAL ERROR A S HELD BY THE LD.CIT(A). ITA NO.1335/CHD/2019 A.Y. 2008-09 PAGE 20 OF 20 IN VIEW OF THE ABOVE, WE HAVE NO HESITATION IN HOLD ING THAT THE IMPUGNED ORDER IS NOT SUSTAINABLE IN LAW H AVING BEEN FRAMED ON A DEAD PERSON AND IS, THEREFORE, LIA BLE TO BE QUASHED. THE ADDITIONAL GROUND RAISED BY THE ASSESS EE IS ALSO ALLOWED. 27. IN THE RESULT, THE ABOVE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) !'/ JUDICIAL MEMBER )*'/ ACCOUNTANT MEMBER DATED: 14 TH JUNE, 2021 * * *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 / GUARD FILE ' / BY ORDER, / ASSISTANT REGISTRAR