SHRI BRIJ MOHAN NARANG, BILASPUR V. INCOME TAX OFFICER, WARD- 2(2), BILASPUR

ITA 166/RPR/2019

AI Insights

The case involves an appeal by the legal heir of Late Shri Brij Mohan Narang against the order passed by the CIT(Appeals), Bilaspur, which arose from an assessment order under Sec. 147/143(3) of the Income-tax Act, 1961. The primary contention was the failure of the Assessing Officer (A.O) to provide a copy of the 'reasons to believe' for reopening the assessment under Sec. 147, despite a specific request from the assessee. The Tribunal noted that this omission deprived the assessee of the statutory right to object to the reopening of the case, thus affecting the validity of the jurisdiction assumed by the A.O.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 128069 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-11-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 06-08-2019
• Other Referred Cases: National Thermal Power Company Ltd. Vs. CIT, GKN Driveshafts (India) Ltd. Vs. ITO & Ors., Agarwal Metals and Alloys Vs. ACIT & Ors., Pr. CIT Vs. Jagat Talkies Distributors
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 147; 148; 64

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायप ु र मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी रवीश स ू द, ÛयाǓयक सदèय के सम¢ BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER आयकर अपील सं./ ITA No.166/RPR/2019 Ǔनधा[रण वष[ / Assessment Year : 2013-14 Anupriya Narang Legal Heir Late Shri Brij Mohan Narang, C.G. Plaza, Telephone Exchange Road, Bilaspur (C.G.)-495 001 PAN : ABYPN6542M .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer, Ward-1(1), Bilaspur (C.G.) ......Ĥ×यथȸ / Respondent Assessee by : Shri Vinod Kumar Khatri, CA Revenue by : Shri G.N Singh, Sr. DR स ु नवाई कȧ तारȣख / Date of Hearing : 09.11.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 30.11.2022 2 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 आदेश / ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the CIT(Appeal), Bilaspur, dated 21.05.2018, which in turn arises from the order passed by the A.O under Sec. 147/143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 29.02.2016 for assessment year 2013-14. The assessee has assailed the impugned order on the following grounds of appeal: “1. That the order passed u/s 147/143(3) by the Ld. CIT (A) is bad in law as well as on facts. 2. That the Learned CIT(A) failed to appreciate the fact that there being no provision in the Act authorising the survey team to obtain estimated report of the registered valuer, placing reliance on such report was contrary to law particularly when reference to DVO was held by the same Learned CIT(A) as contrary to law in earlier assessment order. 3. Reference to the DVO without rejecting the books of account was contrary to law, placing reliance on the estimated report of the registered valuer without first detecting any suppression in investment recorded in the books of account and ultimately sustaining addition of Rs.2,00,290/- again based on pure estimations, are contrary to facts and law. 4. That the Learned CIT (A) erred both on facts and in law in sustaining estimated addition of Rs.2,00,290/- without bringing any corroborative evidence on record to substantiate such estimation and without giving justification for ignoring the investment recorded in the books of account. 3 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 5. That the learned CIT (A) erred in law and on facts that reference to DVO without rejecting books of accounts was proper. 6. That the appellant craves leave to add to and/or amend. Alter; rescind the grounds taken here in above, before or the time of hearing of this appeal.” Also, the assessee has raised an additional ground of appeal which reads as under: “(ii) That the Learned CIT(Appeals) erred both on facts and in law in upholding the initiation of proceedings u/s.147 of the Act and completion of the impugned assessment u/s.143(3)/147 of the Act without appreciating that the A.O failed to communicate reasons for re-opening the case.” 2. Succinctly stated, the assessee had on 31.03.2014 filed his return of income for the assessment year 2013-14, declaring an income of Rs.5,31,500/-. Subsequently, the case of the assessee was reopened u/s.147 of the Act. Notice u/s.148 dated 25.04.2014 was issued to the assessee. In compliance, the assessee vide his letter dated 06.08.2014 submitted before the A.O that the original return of income filed by him on 31.03.2014 may be treated as a return u/s.148 of the Act. Also, the assessee vide his aforesaid letter dated 12.08.2014 had requested the A.O for supply of copy of “reasons to believe” a/w. copy of the approval that was obtained for reopening his case u/s.147 of the Act. 4 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 3. As is discernible from the records, the A.O accepted the aforesaid request of the assessee for treating his original return of income as a return filed u/s.148 of the Act and issued notice(s) u/s.143(2)/142(1) of the Act. Assessment was thereafter framed by the A.O vide his order passed u/s.147/143(3), dated 29.02.2016, determining the income of the assessee at Rs.7,31,790/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success. 5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before me. 6. Before proceeding any further I shall first deal with the maintainability of the additional ground of appeal that has been raised by the assessee-appellant. Ostensibly, the assessee by raising the additional ground of appeal has sought my indulgence for adjudicating the sustainability of the assessment framed u/s.147/143(3) of the Act. As the adjudication of the aforesaid issue involves purely a question of law which would not require looking any further beyond the facts available on record, therefore, I have no hesitation in admitting the same. The aforesaid view that where an assessee, had raised, though for the first time, an additional ground of appeal before the Tribunal which involves purely a question of law 5 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 and requires no further verification of facts, then, the same merits admission finds support from the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). Now, I will first proceed with adjudication of the additional ground. 7. At the very outset of the hearing of the appeal, it was submitted by the Ld. Authorized Representative (for short ‘AR) for the assessee that the impugned assessment had been framed by the A.O without providing to the assessee a copy of the “reasons to believe” on the basis of which his case was reopened u/s.147 of the Act. It was submitted by the Ld. AR that though the assessee had duly complied with the notice u/s.148 of the Act, dated 25.04.2014 and filed his return of income, but the AO despite specific request had not made available to him a copy of the “reasons to believe” on the basis of which his case was reopened u/s. 147 of the Act. It was submitted by the Ld. AR that as the failure on the part of the A.O to furnish the copy of “reasons to believe” to the assessee had divested him of his statutory right of objecting to the very basis of reopening of his case u/s.147 of the Act, therefore, the impugned assessment so framed by him was liable to be quashed on the said count itself. 6 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 8. The Ld. Departmental Representative (for short ‘DR) on being confronted with the aforesaid claim of the assessee could not controvert the same. 9. Controversy involved in the present appeal lies in a narrow compass, i.e., sustainability of the assessment framed by the A.O without making available a copy of the “reasons to believe” to the assessee who after duly complying with the notice u/s 148 of the Act is stated to have specifically requested for the same. Before us, it is the claim of the Ld. AR that the assessee had vide a letter dated 12.08.2014, inter alia, requested the A.O to make available a copy of the “reasons to believe” on the basis of which his case was reopened u/s.147 of the Act. The Ld. AR in order to fortify his aforesaid claim had taken us through the aforesaid letter dated 12.08.2014 (supra), on the basis of which the assessee had requested for a copy of “reasons to believe”, Page 39 of APB, which reads as under: “To, The Income Tax Officer 12.08.2014 Ward-1(1), Bilaspur (C.G.) Assessee : Shri Brijmohan Narang C. G. Plaza, Bilaspur. Reference : Your notice dt. 08/08/14 under section 148 of the Income Tax Act, 1961 For assessment year 2013-14 7 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 Subject : COMPLIANCE Dear Sir, 1. The assessee has already filed the Return of income as per particulars given below: Date of filing :31.03.2014 Acknowledgement No. : 165481661310314 Filed with : ITO, Ward-1(1), Bilaspur 2. Photocopy of the acknowledgement for filing the same is enclosed herewith. 3. Kindly treat the aforesaid return of income as filed in compliance to the notice under reference. 4. Your goodself is requested to kindly issue us certified copy of the reasons recorded and approval obtained, if any, for issuance of Notice under reference to enable us to raise our objections. Thanking you, Yours faithfully, Sd/- V.K Khatri ( Counsel of the assessee) 10. As is discernible from the order of the CIT(Appeals), I find that the assessee had in his submissions filed before the first appellate authority brought to his notice that though after complying with the notice u/s.148, dated 25.04.2014, he had vide letter dated 12.08.2014 specifically requested the A.O for the copy of “reasons to believe” on the basis of which, the case was reopened u/s.147 of the Act, but the latter had failed to make available the same. My attention was drawn by the Ld. AR to the submission of the assessee, Page 3-4 of the CIT(Appeals). On a perusal of the aforesaid 8 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 submission, it transpires that not only the assessee had in unequivocal terms brought to the notice of the CIT(Appeals) that he had after complying with the notice u/s.148 of the Act requested the A.O for a copy of the “reasons to believe” that formed the very basis for reopening of its case u/s.147 of the Act but in fact had relied on a plethora of judicial pronouncements wherein various Courts had held that framing of an assessment by the A.O without providing to the assessee a copy of the “reasons to believe” would render the assessment order as bad in law. 11. Admittedly, though the assessee had categorically assailed before the CIT(Appeals) the validity of the assessment order passed by the A.O u/s.147/143(3), dated 29.02.2016, on the ground that the same having been framed de-hors making available a copy of the “reasons to believe” forming the very basis for reopening of the case of the assessee could not be sustained for want of valid assumption of jurisdiction, however, I find that the same had not been disposed off by the CIT(Appeals). Considering the aforesaid facts, I am of the view that the matter requires to be revisited by the CIT(Appeals), who shall in the course of the set-aside proceedings deal with the claim of the assessee qua the validity of the order passed by the A.O u/s.147/143(3) of the Act, dated 29.02.2016 without making available a copy of the “reasons to believe” on the basis of which 9 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 proceeding u/s.147 of the Act were initiated in the case of the assessee, specifically when a request for the same was made by the assessee after complying with the notice u/s.148 of the Act. 12. In so far the aforesaid claim of the Ld. AR is concerned, I principally concur with the position of law canvassed by him qua the validity of the assessment order passed by the A.O u/ss.147/143(3), dated 29.02.2016 without making available to the assessee a copy of the “reasons to believe” that had formed the very basis for reopening of its case u/s.147 of the Act. I am of the considered view that the failure on the part of the A.O to make available to the assessee a copy of the “reasons to believe”, which forms the very basis for reopening of his case goes to the root of the validity of jurisdiction that was assumed by him for framing the assessment. I, say so, for the reason that when an assessee despite a specific request for a copy of the “reasons to believe” is not provided with the same by the A.O, then, he remains divested of his statutory right of objecting to the very basis on which proceedings u/s.147 of the Act were initiated in his case. As held by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO & Ors. (2003) 259 ITR 19 (SC), the assessee after obtaining a copy of the “reasons to believe” is vested with a statutory right to file his objections before the A.O, which the latter is required to dispose off on the basis of a speaking order. In a 10 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 case where there is a complete violation of the applicable principle of law by the A.O, who despite a specific request by the assessee had failed to communicate to him the “reasons to believe” that had formed the very basis for reopening of his assessment u/s.147 of the Act, then, the very assumption of jurisdiction by him and framing of the impugned assessment cannot be sustained and is liable to be struck down on the said count itself. The aforesaid view is supported by the judgment of the Hon’ble High Court of Bombay in the case of Agarwal Metals and Alloys Vs. ACIT & Ors. (2012) 346 ITR 64 (Bom.). In its aforesaid order, the Hon’ble High Court had after taking cognizance of the fact that the A.O in the case before them had failed to communicate the “reasons to believe” on the basis of which the case of the assessee was reopened, quashed the assessment by treating the same as having been passed in a brazen violation of the governing principles of law. The relevant observations of the Hon’ble High Court are culled out as under: “4. On these admitted facts, it is evident that there has been a complete violation of the applicable principles of law by the Assessing Officer. The Assessing Officer was required to communicate the reasons for reopening the assessment which he has failed to do. The Assessing Officer despite the judgment of the Supreme Court in GKN Driveshafts (India) Ltd., [2003] 259 ITR 19 (SC) has failed to provide an opportunity to the assessee to submit his objections to the reopening of the assessment. In the affidavit-in-reply, it has been submitted that the assessee was well aware of the reasons for the reopening of the assessment as the reasons were on the record for the assessment year 2007–08. This is clearly a specious explanation. According to counsel 11 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 appearing on behalf of the Revenue, during the course of the assessment year 2007–08, it has been found that the petitioner has been engaged in under invoicing and it is on that basis that the assessment for the assessment year 2004–05 is sought to be reopened. Even if the submission of the learned counsel were to be correct, reasons have to be communicated to the petitioner. There has admittedly been no communication of reasons to the petitioner. In these circumstances, we are inclined to quash and set aside the impugned order of assessment which has been passed in a brazen violation of the governing principles of law. However, in order to obviate the bar of limitation, we intend to incorporate a protective stay in order to enable the Assessing Officer to proceed further in accordance with law.” Also, a similar view had been taken by the Hon’ble High Court of Delhi in the case of Pr. CIT Vs. Jagat Talkies Distributors (2017) 85 taxmann.com 189 (Del.). In its aforesaid order, the Hon’ble High Court relying on the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Trend Electronics, ITA No.1867 of 2013, had held, that on account of the failure of the A.O to make available to the assessee a copy of the reasons for reopening of the assessment u/s.147 of the Act the re-assessment proceedings would stand vitiated in law. 13. I, thus, in terms of my aforesaid observation, restore the matter to the file of the CIT(Appeals) for the limited purpose of verifying the veracity of the assessee’s claim that despite his specific request no copy of the “reasons to believe” were made available to him by the A.O, and in case the same is found to be in order, then, pass an order in terms of my aforesaid observations. 12 Shri Brij Mohan Narang Vs. ITO, Ward-2(2) ITA No.166/RPR/2019 14. In the result, appeal of the assessee is allowed for statistical purposes in terms of the aforesaid observations. Order pronounced in open court on 30 th day of November, 2022. Sd/- (रवीश स ू द /RAVISH SOOD) ÛयाǓयक सदèय/JUDICIAL MEMBER रायप ु र / Raipur; Ǒदनांक / Dated : 30 th November, 2022 ***SB आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeal), Bilaspur (C.G.) 4. The Pr. CIT, Bilaspur (C.G.) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, “एक-सदèय” बɅच, रायप ु र / DR, ITAT, “SMC” Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव /Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur