ITO, Malerkotla V. Sh. Suresh Kumar Gupta, Malerkotla

ITA 153/CHANDI/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5434 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 08-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S KEMWAL
• Assessee Lawyers: S R CHHABRA
• Keywords: Unexplained investment; Opportunity of being heard; Principle of natural justice; Period of limitation; Procedural lapse
• Section: 142(1); 147; 131; 68; 69; 27; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: A BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM ITA NO. 153/CHANDI/2010 ASSESSMENT YEAR: 2004-05 I.T.O. IV(4), MALERKOTLA V. SURESH KUMAR GUPTA S/0 SHRI WALAITI RAM GUPTA PROP. GUPTA PROVISION STORE INSIDE DELHI GATE, MALERKOTLA PAN: ABWPG 3437G C.O. NO. 15/CHANDI/2010 ASSESSMENT YEAR 2004-05 SURESH KUMAR GUPTA V. I.T.O DEPARTMENT BY: SHRI S.S. KEMWAL ASSESSEE BY: S/SHRI S.R. CHHABRA & AMARJIT KAMBOJ ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE DEPARTMENT AND THE MEMORANDUM OF CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 26.11.2008. BOTH OF THEM RELATE T O AY 2004-05. 2. CONSEQUENT UPON THE INFORMATION RECEIVED BY THE AO FROM THE ITO, IV(3) MALERKOTLA, VIDE HIS LETTER NO. 26921 DATED 17.1.20 08, THAT THE ASSESSEE WAS PROPRIETOR OF M/S MODI SHARE SHOPPEE W.E.F. 1.11.20 03, THE AO CARRIED OUT INQUIRIES FROM HDFC BANK AND CANARA BANK AND LEARNT THAT THE ASSESSEE HAD DEPOSITED A SUM OF RS. 1,84,18,032/- BETWEEN 1.11.2 003 AND 31.3.2004 IN CASH OR BY CHEQUE. AFTER RECODING THE REASONS AS REQUIRE D BY LAW, THE AO ISSUED NOTICE U/S 148 ON 27.3.2008 AND SENT THE SAME BY REGISTERE D POST AT THE ADDRESS GIVEN BY THE ASSESSEE IN HIS RETURN OF INCOME FOR THE ASS ESSMENT YEAR UNDER APPEAL. HOWEVER THE ENVELOPE CONTAINING THE AFORESAID NOTIC E WAS RECEIVED BACK WITH THE REMARKS OF POSTAL AUTHORITIES THAT THE ASSESSEE WAS NOT LIVING AT THAT ADDRESS. IN THE MEANTIME THE AO GOT SERVICE OF THE SAID NOTICE AFFECTED THROUGH AFFIXTURE BY THE INSPECTOR OF HIS OFFICE IN THE PRESENCE OF SHRI RAMANAND, ANOTHER OFFICIAL ON 31.3.2008. THE CASE WAS SELECTED FOR SCRUTINY. AS S TATED IN THE ASSESSMENT ORDER, THE AO THEREAFTER ISSUED SEVERAL LETTERS, NAMELY, L ETTERS DATED 19.6.2008, 28.8.2008, 11.10.2008, 20.10.2008 AND 4.11.2008 CAL LING UPON THE ASSESSEE TO FILE RETURN OF HIS INCOME PURSUANT TO THE NOTICE IS SUED BY THE AO U/S 148. THE ASSESSEE, BY HIS REPLY/LETTER DATED 2.9.2008, INTIMATED THAT HE WAS TEMPORARILY RESIDING AT 137-I, SARABHA NAGAR, LUDHIANA AND THAT HE HAD ALREADY FILED HIS INCOME-TAX RETURN FOR THE ASSESSMENT YEAR UNDER APP EAL ON 8.2.2005. THEREAFTER, THE AO ISSUED SUMMONS U/S 131 ON 6.11.2008 REQUIRIN G PERSONAL ATTENDANCE OF THE ASSESSEE ON 14.11.2008. HOWEVER THE ASSESSEE SE NT MEDICAL CERTIFICATE ISSUED BY THE CIVIL HOSPITAL, MALERKOTLA ON 13.11.2008 AND THUS DID NOT APPEAR BEFORE THE AO. ON 12.11.2008 A QUESTIONNAIRE WAS ISSUED BY THE AO TOGETHER WITH NOTICE U/S 153 & C.O. 15/CHANDI/2010 SURESH KUMAR GUPTA, MALERKOTLA V. ITO 2 142(1) LISTING THE CASE OF THE ASSESSEE FOR HEARING ON 20.11.2008. ON 20.11.2008 SHRI VIJAY SHARMA ATTENDED AND INSPECTED THE FILE A ND THEREAFTER REQUESTED FOR ADJOURNMENT TO THE FIRST WEEK OF DECEMBER. ON 3.12. 2008, SHRI RAJIV GUPTA, C.A. AND SON OF THE ASSESSEE APPEARED BEFORE THE AO AND CHALLENGED THE PROCEEDINGS INITIATED BY THE AO U/S 148 ON THE GROUND THAT THE NOTICE DATED 27.3.2008 U/S 148 WAS NOT PROPERLY SERVED ON THE ASSESSEE AND THAT TH ERE WAS NO PROPER AFFIXTURE AT THE PLACE/BUILDING WHERE THE ASSESSEE LAST RESIDED. THE AO DID NOT ACCEPT THE AFORESAID OBJECTIONS AND CONVEYED HIS DECISION IN T HIS BEHALF ON 3.12.2008. 3. THE ASSESSEE HIMSELF ATTENDED THE OFFICE ON 10.1 1.2008. THE AO RECORDED HIS STATEMENT. IN HIS STATEMENT THE ASSESSEE STATED THAT HE WAS LIVING AT GUPTA BHAWAN, INSIDE DELHI GATE, MALERKOTLA AND THAT HE N EVER SHIFTED TO 137-I, SARABHA NAGAR, LUDHIANA. IT MAY BE MENTIONED HERE THAT THE ASSESSEE HAD FILED COPY OF FIR LODGED WITH THE POLICE STATION, BASTI JODHEWAL, LUDHIANA REGARDING LOSS OF BOOKS OF ACCOUNT OF MODI SHARE SHOPPEE RELEVANT TO ASSESSMENT YEAR 2000-01 TO 2003-04 TOGETHER WITH REPLY FILED ON 3.12.2008. THE AO, THEREFORE, EXAMINED THE ASSESSEE AS REGARDS LOSS OF BOOKS OF ACCOUNT WHILE RECORDING HIS STATEMENT ON 10.12.2008. DURING THE COURSE OF HIS STATEMENT, THE ASSESSEE CLAIMED THAT THE BOOKS OF ACCOUNT WERE LYING WITH SINGLA, GUPTA AND CO. AND THAT IT WAS THEIR EMPLOYEE SHRI VARINDER SINGH WHO WAS BRINGING THE B OOKS OF ACCOUNT TO DELIVER THEM AT BASTI JODHEWAL CHOWK, LUDHIANA. THE AO SPEC IFICALLY ASKED AS TO WHAT WAS THE MODE OF TRANSPORT THROUGH WHICH SHRI VARIND ER SINGH WAS BRINGING THE BOOKS. THE ASSESSEE, HOWEVER SHOWED HIS INABILITY O N THE GROUND THAT HE DID NOT REMEMBER. THE AO FURTHER EXAMINED HIM AS TO HOW A S INGLE MAN COULD BRING ALL THE BOOKS FROM KAILASH CINEMA CHOWK TO BASTI JODHEW AL CHOWK AND THAT TOO IN THE LATE EVENING. THE ASSESSEE STATED HE WOULD NOT LIKE TO SAY ANYTHING IN THIS BEHALF. THE AO FURTHER EXAMINED HIM AS REGARDS THE BOOKS OF ACCOUNT FOR THE NEXT FINANCIAL YEAR, I.E., 2004-05. THE ASSESSEE REPLIED THAT HE WAS NOT SURE AS TO WHERE HIS BOOKS OF ACCOUNT FOR THAT YEAR WERE LYING . THE AO THEREAFTER ASKED THE ASSESSEE TO EXPLAIN AS TO WHERE HE HAD MADE ANY INQ UIRIES FROM POLICE STATION AS REGARDS THE FATE OF INVESTIGATION PURSUANT TO THE F IR LODGED BY HIM. THE ASSESSEE REPLIED THAT THE MATTER WAS OLD AND THEREFORE IT WA S NOT POSSIBLE FOR HIM TO DISCLOSE EACH AND EVERY FACT CORRECTLY. 4. THE AO ISSUED A SHOW CAUSE NOTICE DATED 17.12.20 08 CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE IMPUGNED SUM A GGREGATING TO RS.1,84,18,032/- DEPOSITED IN CASH OR BY CHEQUE IN HDFC BANK AND CANARA BANK SHOULD NOT BE TREATED AS UNEXPLAINED U/S 69 OF INCO ME-TAX ACT. THE MATTER WAS LISTED FOR HEARING BY THE AO ON 24.12. 2008. ON 24. 12.2008, A NOTICE U/S 142(1) DATED 26.12.2008 WAS DISPATCHED BY REGISTERED POST FIXING THE CASE FOR HEARING ON 29.12.2008. THE SAID NOTICE WAS SERVED BY AFFIXT URE ON 26.12.2008 AT 137-I, SARABHA NAGAR, LUDHIANA AS A MATTER OF PRE-CAUTION. SHRI RAJIV GUPTA, C.A AND SON OF THE ASSESSEE FILED WRITTEN REPLY AT DAK COUN TER ON 30.12.2008 ALONG WITH A 153 & C.O. 15/CHANDI/2010 SURESH KUMAR GUPTA, MALERKOTLA V. ITO 3 COPY OF REPLY WHICH HE HAD EARLIER FILED ON 24.12.2 008. HE FILED CONFIRMATIONS FROM 12 PARTIES. THE AO NOTED THAT EVEN THOSE CONFIRMATI ONS DID NOT CONTAIN COMPLETE POSTAL ADDRESSES OF THE PARTIES ISSUING CONFIRMATIO NS AND THEREFORE, IT WAS NOT POSSIBLE FOR HIM TO CARRY OUT ANY INVESTIGATION OR TO SCRUTINIZE THEM AND EXAMINE THEM. IN THE ABSENCE OF ANY SATISFACTORY EXPLANATIO N, THE AO TREATED THE IMPUGNED DEPOSITS AGGREGATING TO RS.1,84,18,032/- A S UNEXPLAINED AND CONSEQUENTLY TAXED THE SAME AS UNEXPLAINED INCOME O F THE ASSESSEE. 5. AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASS ESSEE FILED APPEAL BEFORE THE LD. CIT(A) BY WHICH HE CHALLENGED NOT ONLY THE VALIDITY OF PROCEEDINGS INITIATED BY THE AO U/S 147/148 BUT ALSO THE CORRECTNESS OF T HE ADDITIONS MADE BY THE AO. THE LD. CIT(A) UPHELD THE VALIDITY OF INITIATION OF PROCEEDINGS BY THE AO U/S 147/148. HE HOWEVER DELETED THE ADDITION MADE BY TH E AO. THE ASSESSEE IS THEREFORE, IN APPEAL THROUGH MEMORANDUM OF CROSS OB JECTIONS CHALLENGING THE DECISIONS OF LD. CIT(A) UPHOLDING THE VALIDITY OF I NITIATION OF PROCEEDINGS BY THE AO U/S 147/148 WHILE THE DEPARTMENT IS IN APPEAL AGAIN ST THE ORDER PASSED BY THE LD. CIT(A) DELETING THE ADDITIONS AMOUNTING TO RS.1,84, 18,032/- MADE BY THE AO U/S 69. CROSS OBJECTION NO. 15/CHANDI/2010 6. SINCE THE ISSUE RAISED IN THE MEMORANDUM OF CROS S-OBJECTIONS GOES TO THE ROOT OF THE MATTER, THE CROSS-OBJECTIONS FILED BY T HE ASSESSEE ARE BEING DISPOSED OFF FIRST. THE ASSESSEE HAS TAKEN THE FOLLOWING GRO UNDS: 1. THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN LAW AN D ON FACTS OF THE CASE: (A) BY ARBITRARILY AND WRONGLY SUSTAINING THE REASS ESSMENT PROCEEDINGS U/S 147 OF INCOME-TAX ACT WITHOUT HAVIN G ANY MATERIAL AGAINST THE ASSESSEE FROM WHICH HE COULD FORM A REA SONABLE BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT. (B) BY ARBITRARILY AND WRONGLY SUSTAINING THE REASS ESSMENT PROCEEDINGS U/S 147 IN SPITE OF THE FACT THAT THERE WAS NO PROPER SERVICE OF NOTICE U/S 148 OF INCOME-TAX ACT. 2. THE ABOVE SAID ORDER IS BAD IN LAW AND CONTRAR Y TO THE FACTS OF CASE. 3 IT S THEREFORE, PRAYED TAT CROSS OBJECTION MY PL EASE BE ACCEPTED AND SUCH RELIEF MAY KINDLY BE ALLOWED WHICH MAY BE DEEM ED FIT AND PROPER UNDER THE CIRCUMSTANCES OF THE CASE. 7. IN SUPPORT OF THE AFORESAID GROUNDS, THE LD. COU NSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS THAT WERE EARLIER MADE B EFORE THE CIT(A). A COPY OF THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A) HAS ALSO BEEN FILED BEFORE US. HIS SUBMISSIONS AS MADE BEFORE US ARE, IN BRIEF, THREE- FOLD. HIS FIRST SUBMISSION IS THAT THE NOTICE ISSUED BY THE AO U/S 147/148 WAS NOT PRO PERLY SERVED AND THEREFORE 153 & C.O. 15/CHANDI/2010 SURESH KUMAR GUPTA, MALERKOTLA V. ITO 4 THE VERY INITIATION OF PROCEEDINGS U/S 147/148 WAS INVALID AND CONSEQUENTLY THE ASSESSMENT MADE ON THAT BASIS WAS LIABLE TO BE QUAS HED. HIS SECOND SUBMISSION IS THAT THE AO HAS NOT COMPLIED WITH THE PROCEDURE FOR SERVICE OF NOTICE THROUGH AFFIXTURE AND THEREFORE THE SERVICE OF NOTICE THROU GH AFFIXTURE WAS BAD. HIS THIRD SUBMISSION IS THAT MERE DEPOSITS IN BANK ACCOUNT CO ULD NOT MEAN THAT THEY WERE IN THE NATURE OF INCOME ASSESSABLE TO TAX AND THERE FORE THE AO HAD NO BASIS TO FORM THE BELIEF THAT THE INCOME CHARGEABLE TO TAX H AD ESCAPED THE ASSESSMENT. ACCORDING TO HIM THE MATERIAL IN THE POSSESSION OF THE AO WAS SUFFICIENT TO CAUSE SUSPICION BUT NOT SUFFICIENT FOR FORMATION OF BELIE F THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 8. IN REPLY, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A) IN THIS BEHALF. 9. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR RIVAL SUBMISSIONS. THE AO HAS SENT THE IMPUGNED NOTICE BY REGISTERED POST AT THE ADDRESS FURNISHED BY THE ASSESSEE IN HIS RETURN EAR LIER FILED U/S 139 FOR THIS VERY ASSESSMENT YEAR. THIS FACT IS NOT DISPUTED BY THE A SSESSEE. SECTION 149 OF THE INCOME-TAX ACT REQUIRES ISSUE OF NOTICE AND NOT SER VICE OF NOTICE FOR ASSUMPTION OF JURISDICTION U/S 147/148 SUBJECT, OF COURSE, TO THE FULFILLMENT OF OTHER CONDITIONS. IN THE PRESENT CASE, WE ARE CONCERNED WITH THE ISSU E AS TO WHETHER MERE ISSUE OF NOTICE IS SUFFICIENT FOR INITIATION OF PROCEEDINGS U/S 147 AND MEETS THE REQUIREMENT OF SECTION 149. THIS ISSUE HAS BEEN AUTHORITATIVELY SETTLED BY THE JUDGMENTS RENDERED BY THE FULL BENCH OF THE HON'BLE JURISDICT IONAL HIGH COURT IN JAI HANUMAN TRADING CO. PVT LTD. V. CIT, 110 ITR 36 IN WHICH IT HAS BEEN HELD THAT THE EXPRESSION ISSUED OCCURRING IN SECTION 149 CANNOT BE GIVEN THE MEANING SERVED. THE AFORESAID JUDGMENT HAS BEEN IMPLIEDLY APPROVED BY THE HON'BLE SUPREME COURT IN R.K. UPADHYAYA V. SHANA BHAI P. PATEL, 166 ITR 163 (SC) IN WHICH THE HON'BLE SUPREME COURT HAS HELD THAT ONCE A NOTICE I S ISSUED WITHIN THE PERIOD OF LIMITATION, JURISDICTION IS VESTED IN THE AO TO PRO CEED TO RE-ASSESS AND THAT THE REQUIREMENT OF ISSUE OF NOTICE IS SATISFIED WHEN A NOTICE IS ACTUALLY ISSUED. IT IS, THEREFORE, HELD THAT THE ISSUE OF NOTICE BY THE AO WHICH IS EVIDENCED BY THE FACT THAT IT WAS SENT BY REGISTERED POST IS SUFFICIENT F OR THE VALID INITIATION OF THE PROCEEDINGS U/S 147/148 OF INCOME-TAX ACT. 10. IT IS INDEED TRUE THAT THE AO, AFTER HAVING ISS UED NOTICE U/S 148 AND THEREBY HAVING ASSUMED JURISDICTION U/S 147, CANNOT PROCEED TO RE-ASSESS UNLESS HE SERVES THE NOTICE ON THE ASSESSEE. THEREFORE, TH E RELEVANT ISSUE IS WHETHER THE NOTICE ISSUED BY THE AO U/S 147/148 WAS SERVED ON T HE ASSESSEE BEFORE THE COMPLETION OF RE-ASSESSMENT. AS STATED EARLIER, NOT ICE ISSUED U/S 147/148 WAS SENT BY REGISTERED POST, WHICH WAS HOWEVER RECEIVED BACK WITH THE POSTAL REMARKS THAT THE ASSESSEE WAS NOT FOUND AT THE ADDR ESS GIVEN ON THE ENVELOPE CONTAINING THE NOTICE. THIS ISSUE HAS BEEN AUTHORIT ATIVELY SETTLED BY SEVERAL 153 & C.O. 15/CHANDI/2010 SURESH KUMAR GUPTA, MALERKOTLA V. ITO 5 JUDGMENTS OF THE HON'BLE SUPREME COURT, E.G., JUDGM ENT IN C.C. ALAVI HAZI V. PALAPETTY MUHAMMAD (2007) 6 SCC 555. A BENCH OF THR EE JUDGES OF THE HON'BLE SUPREME COURT HAS HELD, IN THE CONTEXT OF SERVICE O F NOTICE U/S 133 OF NEGOTIABLE INSTRUMENTS ACT, AS UNDER: 14. SEC. 27 GIVES RISE TO A PRESUMPTION THAT SERV ICE OF NOTICE HAS BEEN EFFECTED WHEN IT IS SENT TO THE CORRECT ADDRESS BY REGISTERED POST. IN VIEW OF THE SAID PRESUMPTION, WHEN STATING THAT A NOTICE HA S BEEN SENT BY REGISTERED POST TO THE ADDRESS OF THE DRAWER, IT IS UNNECESSAR Y TO FURTHER AVER IN THE COMPLAINT THAT IN SPITE OF THE RETURN OF THE NOTICE UNSERVED, IT IS DEEMED TO HAVE BEEN SERVED OR THAT THE ADDRESSEE IS DEEMED TO HAVE KNOWLEDGE OF THE NOTICE. UNLESS AND UNTIL THE CONTRARY IS PROVED BY THE ADDRESSEE, SERVICE OF NOTICE IS DEEMED TO HAVE BEEN EFFECTED AT THE TIME AT WHICH THE LETTER WOULD HAVE BEEN DELIVERED IN THE ORDINARY COURSE OF BUSIN ESS. THIS COURT HAS ALREADY HELD THAT WHEN A NOTICE IS SENT BY REGISTER ED POST AND IS RETURNED WITH A POSTAL ENDORSEMENT REFUSED OR NO T AVAILABLE IN THE HOUSE OR HOUSE LOCKED OR SHOP CLOSED OR A DDRESSEE NOT IN STATION, DUE SERVICE HAS TO BE PRESUMED. {VIDE JAGDISH SINGH VS. NATTHU SINGH (1992) I SCC 647; SLATE OF MP. VS. HIR ALAL (1996) 7 SCC 523 AND V. RAJA KUMARI VS. P. SUBBARAMA NAIDU (2004) 8 SCC 774]. IT IS, THEREFORE, MANIFEST THAT IN VIEW OF THE PRESUMPTION AVAILABLE UNDER S. 27 OF THE ACT, IT IS NOT NECESSARY TO AVER IN THE COMPLAI NT UNDER S. 138 OF THE ACT THAT SERVICE OF NOTICE WAS EVADED BY THE ACCUSED OR THAT THE ACCUSED HAD A ROLE TO PLAY IN THE RETURN OF THE NOTICE UNSERVED. 11. THE PRINCIPLES LAID DOWN IN THE AFORESAID JUDGM ENT ARE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE AND THEREFORE THEY WERE BROUGHT TO THE NOTICE OF THE PARTIES AT THE TIME OF HEARING. THE IMPUGNED NOTICE WAS SENT BY REGISTERED POST AT THE ADDRESS GIVEN BY THE ASSESSEE HIMSELF. AFTER HAVING FURNISHED THE ADDRESS TO THE AO, THE ASSESSEE NEVER BOTHERED TO COMMUNICA TE ANY CHANGE IN HIS ADDRESS. THE AO COULD HAVE DONE NOTHING EXCEPT TO S END THE NOTICE BY REGISTERED POST AT THE ADDRESS GIVEN BY THE ASSESSEE. THE ASSE SSEE WAS NOT FOUND THERE WITH THE RESULT THAT THE NOTICE WAS RECEIVED BACK WITH T HE POSTAL REMARKS AS AFORE- STATED. HAVING FAILED TO COMMUNICATE ANY CHANGE IN HIS ADDRESS, THE ASSESSEE CANNOT BE PERMITTED TO DRAW ADVANTAGE OUT OF HIS OW N INACTION AND TURN AROUND TO PLEAD THAT SERVICE OF NOTICE BY REGISTERED POST WAS INVALID AS IT WAS NOT SENT AT THE CHANGED ADDRESS. IN SUCH A SITUATION, THE SERVI CE WOULD BE PRESUMED TO HAVE BEEN EFFECTED IN TERMS OF THE AFORESAID JUDGMENT. 12. IN THE CONTEXT OF NOTICE, SERVICE IMPLIES FOR MAL COMMUNICATION OF THE NOTICE AFTER IT HAS BEEN ISSUED SO AS TO FACILITATE ITS COMPLIANCE BY THE PARTY TO WHOM IT IS COMMUNICATED. CANONS OF NATURAL JUSTICE DEMAND THAT A DECISION IN WHICH A PERSON HAS CONCERN SHOULD NOT BE TAKEN AGAI NST HIM WITHOUT AFFORDING 153 & C.O. 15/CHANDI/2010 SURESH KUMAR GUPTA, MALERKOTLA V. ITO 6 HIM AN OPPORTUNITY TO BE HEARD; STATUTORY PROVISION S REGARDING SERVICE OF NOTICE ARE ONLY CODIFICATIONS OF THE AFORESAID PRINCIPLE O F NATURAL JUSTICE. PERUSAL OF ASSESSMENT ORDER SHOWS THAT THE AO HAS ISSUED SEVER AL LETTERS, E.G., LETTERS DATED 19.6.2008 AND 28.82008; INFORMING THE ASSESSEE ABOU T THE ISSUE OF NOTICE U/S 147/148 BY HIM AND REQUESTING THE ASSESSEE TO FILE THE RETURN OF INCOME PURSUANT TO THE NOTICE ISSUED BY THE AO U/S 147/148. BY HIS LETTER DATED 2.9.2008 ADDRESSED TO THE ITO, THE ASSESSEE SOUGHT INSPECTIO N OF THE FILE CONTAINING ISSUE OF NOTICE U/S 147/148. HE NOT ONLY INSPECTED THE SA ID FILE ON 20.11.2008, I.E., BEFORE THE RE-ASSESSMENT WAS COMPLETED, BUT ALSO TO OK THE COPIES OF THE IMPUGNED NOTICE. HAVING THUS OBTAINED A COPY OF THE NOTICE, THE ASSESSEE CANNOT TURN AROUND TO SAY THAT HE HAS NOT RECEIVED THE NOT ICE ISSUED BY THE ASSESSING OFFICER U/S 147/148. EVEN IF THERE IS A PROCEDURAL IRREGULARITY IN THE SERVICE OF NOTICE OF RE-ASSESSMENT, IF IT CAN BE FOUND FROM TH E FACTS OF THE CASE THAT THE ASSESSEE MUST HAVE RECEIVED THE NOTICE, THE CONTENT ION ON BEHALF OF SUCH AN ASSESSEE THAT THE NOTICE WAS NOT PROPERLY SERVED WO ULD DESERVE TO BE REJECTED. THE FACTS AVAILABLE ON RECORD INDICATE THAT THE ASS ESSEE HAD INSPECTED THE FILE AND TAKEN A COPY OF NOTICE OF RE-ASSESSMENT BEFORE THE RE-ASSESSMENT WAS COMPLETED. IT CANNOT THEREFORE BE SAID THAT THE ASSESSEE HAS N OT RECEIVED THE IMPUGNED NOTICE. THE REQUIREMENTS OF SECTION 148 AS REGARDS SERVICE OF THE NOTICE THUS STAND COMPLIED WITH. 13. THE AO HAS INITIATED THE PROCEEDINGS U/S 147/14 8 ON THE BASIS OF RELEVANT AND DEFINITE MATERIAL IN HIS POSSESSION. THE MERE R ECEIPT OF SUM HAS BEEN HELD TO BE IN THE NATURE OF ASSESSABLE INCOME UNLESS THE AS SESSEE PROVES OTHERWISE. IN THE PRESENT CASE THE ASSESSEE WAS FOUND TO HAVE MAD E DEPOSITS AGGREGATING TO RS.1,84,18,032/- IN HIS BANK ACCOUNT WITH HDFC AND CANARA BANK. PRIMA FACIE THE RECEIPTS AND DEPOSITS ARE IN THE NATURE OF ASSESSAB LE INCOME UNLESS THE ASSESSEE PROVES THAT THEY ARE NOT OF ASSESSABLE CHARACTER. T HEY WERE THEREFORE SUFFICIENT FOR THE FORMATION OF PRIMA FACIE BELIEF U/S 147 THA T THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE MATERIALS IN POSSESSION OF THE AO ON THE BASIS OF WHICH HE HAS FORMED THE REQUISITE BELIEF WERE SPECI FIC AND DEFINITE AND THEREFORE IT CANNOT BE SAID THAT HE HAS ISSUED THE IMPUGNED NOTI CE ON THE BASIS OF SUSPICION, CONJECTURES AND SURMISES. 14. IN VIEW OF THE FOREGOING, ALL THE GROUNDS TAKEN BY THE ASSESSEE IN THE MEMORANDUM OF CROSS OBJECTIONS ARE DISMISSED. ITA NO. 153/CHANDI/2010 15. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1 THAT THE LD. CIT(A)-I HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS. 1,84,18,032/- MADE BY THE AO U/S 69 OF INCOME-TAX ACT TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF DEPO SITS WITH HDFC BANK, 153 & C.O. 15/CHANDI/2010 SURESH KUMAR GUPTA, MALERKOTLA V. ITO 7 FEROZE MARKET, LUDHIANA AND CANARA BANK, MALERKOTLA DURING THE PERIOD 1.11.2003 TO 31.3.2004. 2. THAT THE ORDER OF LD. CIT(A)-II BE SET ASIDE AND THAT OF THE AO BE RESTORED. 16. AS STATED EARLIER, THE AO HAD MADE INQUIRIES FR OM HDFC BANK AND CANARA BANK AND FOUND THAT THE ASSESSEE HAD DEPOSITED A SU M OF RS.1,84,18,032/- DURING THE PERIOD 1.11.2003 AND 31.3.2004 IN CASH OR BY CH EQUE IN THE AFORESAID BANK ACCOUNTS. HE CALLED UPON THE ASSESSEE TO EXPLAIN TH E NATURE AND SOURCE OF THE AFORESAID DEPOSITS. ACCORDING TO THE AO, THE ASSESS EE DID NOT OFFER ANY SATISFACTORY EXPLANATION AS REGARDS THE NATURE AND SOURCE OF THE AFORESAID DEPOSITS. HE, THEREFORE, TREATED THE IMPUGNED SUM A S UNEXPLAINED INVESTMENT AND ACCORDINGLY CHARGED THE SAME TO INCOME TAX. 17. AGGRIEVED BY THE ORDER PASSED BY THE AO, THE AS SESSEE FILED APPEAL BEFORE THE CIT(A). IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE IMPUGNED DEPOSITS MADE IN CASH IN THE AFORESAID BANK ACCOUNTS WERE RS. 1,0 0,43,868/- AND NOT RS. 86,87,611/- AS TAKEN BY THE AO. IT WAS FURTHER SUBM ITTED THAT THE AMOUNT COVERED BY CHEQUES DEPOSITED IN THE AFORESAID BANK ACCOUNTS WAS RS. 94,72,842/-. 18. AS REGARDS THE NATURE AND SOURCE OF CASH DEPOSI TS AGGREGATING TO RS.1,00,43,868/- AS STATED BEFORE THE CIT(A), THE L D. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSEE WAS R ECEIVING CASH FROM SHRI CHANDAN GUPTA AND PROVIDING BOGUS ENTRIES TO HIM. H E FURTHER SUBMITTED BEFORE THE CIT(A) THAT THE CASH RECEIPTS FROM SHRI CHANDAN GUPTA HAVE ALREADY BEEN CONSIDERED AS INCOME OF SHRI CHANDAN GUPTA U/S 68 O F THE INCOME-TAX ACT BY THE ACIT CIRCLE VIII, LUDHIANA WHICH WAS SUBSEQUENTLY C ONFIRMED BY THE LD. CIT(A) IN THE HANDS OF CHANDAN GUPTA. THE LD. CIT(A) ACCEPTED THE AFORESAID EXPLANATION AND CONCLUDED THAT THE ASSESSEE HAD SATISFACTORILY EXPLAINED THE NATURE AND SOURCE OF CASH DEPOSITS. 19. AS REGARDS THE AMOUNT DEPOSITED BY CHEQUE, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE D ETAILS OF CHEQUES WERE KNOWN TO THE AO AND THEREFORE IT WAS FOR THE AO TO MAKE N ECESSARY INQUIRIES BEFORE TREATING THE SAME AS UNEXPLAINED. THE LD. CIT(A) AC CEPTED THE AFORESAID EXPLANATION GIVEN BY THE ASSESSEE. 20. PERUSAL OF PARA 3.5 OF THE APPELLATE ORDER PASS ED BY THE LD. CIT(A) SHOWS THAT HE HAS TREATED THE ENTIRE AMOUNT DEPOSITED IN CASH AND BY CHEQUES AS PERTAINING TO BUSINESS OF GIVING ACCOMMODATION ENTR IES AND CONSEQUENTLY TOOK 1% THEREOF AS COMMISSION INCOME AND ACCORDINGLY CONFIR MED ADDITION TO THE EXTENT OF RS.25,000/- AS COMMISSION INCOME ARISING FROM THE A FORESAID TRANSACTIONS IN ADDITION TO RS.50,000/- ALREADY SHOWN BY THE ASSESS EE. 153 & C.O. 15/CHANDI/2010 SURESH KUMAR GUPTA, MALERKOTLA V. ITO 8 21. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) , THE DEPARTMENT IS IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD. DR INVITED OUR ATTENTION TO THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMEN T ORDER. HE ALSO INVITED OUR ATTENTION TO THE CASH FLOW STATEMENT FILED BY THE A SSESSEE BEFORE THE LD. CIT(A) IN WHICH HE CLAIMED TO HAVE RECEIVED CASH FROM CHANDAN GUPTA AND THEREAFTER DEPOSITED THE SAME IN BANK FOLLOWED BY WITHDRAWALS. ACCORDING TO THE LD. DR, THE ASSESSEE NEITHER FILED A COPY OF THE ASSESSMENT ORD ER OF CHANDAN GUPTA BEFORE THE AO NOR PRODUCED SHRI CHANDAN GUPTA BEFORE THE A O FOR EXAMINATION. HE SUBMITTED THAT THERE WAS NO EVIDENCE ON RECORD TO E STABLISH THAT THE MONEY WAS REALLY PROVIDED BY SHRI CHANDAN GUPTA TO THE ASSESS EE. HE CONTENDED THAT THE BURDEN WAS ON THE ASSESSEE TO SATISFACTORILY EXPLAI N THE NATURE AND SOURCE OF THE IMPUGNED DEPOSITS WHICH ARE INTER-LINKED INCLUDING THE IDENTITY AND CREDITWORTHINESS OF THE PERSONS FROM WHOM THE IMPUG NED SUM WAS RECEIVED AND ALSO THE GENUINENESS OF THE TRANSACTIONS. HE ARGUED THAT THE ASSESSEE HAS NOT DISCHARGED THE AFORESAID BURDEN. THE LD. DR SUBMITT ED THAT THE LD. CIT(A) HAS DELETED THE ADDITION WITHOUT PROPER APPRECIATION OF ALL THE RELEVANT FACTS AND THEREFORE, HIS ORDER SHOULD BE VACATED. 22. IN REPLY THE LD. COUNSEL FOR THE ASSESSEE SUPPO RTED THE ORDER PASSED BY THE LD. CIT(A). 23. WE HAVE HEARD BOTH THE PARTIES. AS HELD BY THE LD. CIT(A), THE ASSESSEE HAS DEPOSITED A SUM OF RS. 1,00,43,868/- IN CASH IN HIS BANK ACCOUNTS IN ADDITION TO RS. 94,72,842/- DEPOSITED BY CHEQUES. ONCE THE A SSESSEE IS FOUND TO HAVE MADE DEPOSITS, THE BURDEN IS ON THE ASSESSEE TO EXP LAIN SATISFACTORILY THE NATURE AND SOURCE THEREOF. IN THE PRESENT CASE, THE ASSESS EE DID NOT GIVE ANY SATISFACTORILY EXPLANATION BEFORE THE AO SO MUCH SO THAT HE DID NOT FILE ANY RETURN OF INCOME IN RESPONSE TO NOTICE ISSUED BY THE AO U/ S 148. IT IS STATED IN THE APPELLATE ORDER PASSED BY THE LD. CIT(A) THAT THE A SSESSMENT ORDER IN THE CASE OF CHANDAN GUPTA WAS PASSED BY A.C.I.T. CIRCLE VIII, L UDHIANA AND NOT BY THE AO WHO HAS COMPLETED THE ASSESSMENT OF THE ASSESSEE BE FORE US. IT WAS, THEREFORE, INCUMBENT ON THE ASSESSEE TO FURNISH COPY OF THE AS SESSMENT ORDER PASSED BY THE ACIT CIRCLE VIII, LUDHIANA IN THE CASE OF SHRI CHAN DAN GUPTA TO THE AO ASSESSING THE ASSESSEE BEFORE US. HE DID NOT DO SO. THERE IS NO MATERIAL ON RECORD TO HOLD THAT THE ASSESSMENT ORDER PASSED BY ACIT CIRCLE VII I, LUDHIANA WAS EVER PLACED BEFORE THE AO ASSESSING THE ASSESSEE. IT IS FURTHER SEEN FROM THE APPELLATE ORDER PASSED BY THE LD. CIT(A) THAT HE HAS CONFIRMED THE ACTION OF THE ACIT, CIRCLE VIII, LUDHIANA IN THE CASE OF CHANDAN GUPTA. IT IS NOT KN OWN AS TO WHETHER THE AFORESAID ADDITION HAS BEEN ACCEPTED BY CHANDAN GUP TA AND ATTAINED FINALITY. IT IS ALSO NOT KNOWN AS TO WHETHER THERE IS ANY MATERIAL ON RECORD TO HOLD THAT THE INCOME SURRENDERED BY CHANDAN GUPTA WAS UTILISED FO R MAKING THE DEPOSITS IN THE BANK ACCOUNTS OF THE ASSESSEE. 153 & C.O. 15/CHANDI/2010 SURESH KUMAR GUPTA, MALERKOTLA V. ITO 9 24. AS REGARDS THE AMOUNT DEPOSITED BY CHEQUE, IT W AS THE ASSESSEE WHO WAS OBLIGED TO ESTABLISH THE IDENTITY OF THE PARTIES FR OM WHOM CHEQUES WERE RECEIVED AND THE GENUINENESS OF THE TRANSACTIONS. HE FILED O NLY 12 CONFIRMATIONS WHICH ARE IDENTICALLY WORDED. THEY NEITHER CONTAIN THE DATE O N WHICH CONFIRMATIONS WERE ISSUED NOR CONTAIN THE ADDRESSES OF THE PARTIES ISS UING THE CONFIRMATIONS NOR CONTAIN THEIR PERMANENT ACCOUNT NUMBERS NOR THE DET AILS OF THEIR BANK ACCOUNT FROM ON WHICH CHEQUES WERE DRAWN. UNLESS ALL THE DE TAILS AS REGARDS THE NATURE AND SOURCE OF DEPOSITS ARE FURNISHED TO THE SATISFA CTION OF THE AO, IT CANNOT BE SAID THAT THE ASSESSEE HAS DISCHARGED HIS PRIMARY O NUS OF ESTABLISHING THE NATURE AND SOURCE OF THE DEPOSITS. 25. THE LD. CIT(A) HAS REFERRED TO THE REASONS RECO RDED BY THE AO U/S 147/148 FOR CONFIRMING THE ADDITION OF RS.25,000/-. THE REA SONS RECORDED BY THE AO ARE HIS PRIMA FACIE BELIEF THAT THE INCOME CHARGEABLE T O TAX HAS ESCAPED ASSESSMENT. THEY ARE MERE PRIMA FACIE BELIEF AND NOT THE ESTABL ISHED FACT OF INCOME HAVING ESCAPED ASSESSMENT. THE AO CANNOT BE HELD TO BE BOU ND TO MAKE ASSESSMENT ON THE BASIS OF REASONS ALONE. IT ALL DEPENDS UPON THE MATERIALS COMING INTO HIS POSSESSION AFTER THE PROCEEDINGS ARE INITIATED U/S 147/148. 26. THE AFORESAID FACTS ESTABLISH THAT THE LD. CIT( A) HAS DELETED THE IMPUGNED ADDITION WITHOUT PROPER EXAMINATION OF THE CASE. WE THEREFORE SET ASIDE HIS ORDER UNDER APPEAL AND RESTORE THE MATTER TO HIS FILE FOR FRESH DECISION AFTER EXAMINING ALL THE RELEVANT ASPECTS OF THE CASE IN ACCORDANCE WITH LAW. REASONABLE OPPORTUNITY OF HEARING SHALL BE GIVEN TO THE ASSESS EE AS WELL AS TO THE AO. APPEAL FILED BY THE DEPARTMENT IS TREATED AS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED ON MARCH 2011 (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEM BER CHANDIGARH: THE MARCH 2011 SURESH COPY TO: 1. THE APPELLANT, I.T.O. WARD IV((4), MALERKOTLA 2. THE RESPONDENT, SURESH KUMAR GUPTA, MALERKOTLA 3. THE CIT(A)-II, LUDHIANA 4. THE LD. CIT, LUDHIANA 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH