Dy.Commissioner of Income Tax, Kanpur V. Shri Kishore Kumar Kaya, HUF, Kanpur

ITA 177/LKW/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9139 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-11-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 12-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GARG SHRI P K KAPOOR
• Keywords: Unexplained investment; Source of fund; Procedural lapse; Block assessment
• Section: 143(3); 142(1); 147; 69; 148; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.177/LKW/2012 ASSESSMENT YEAR:2002 - 03 SHRI KISHORE KUMAR KAYA, HUF 53/10, NAYAGANJ, KANPUR. VS DY.C.I.T., CENTRAL CIRCLE - 2, KANPUR. PAN:AADHK0228H (RESPONDENT) (APPELLANT) C.O.NO. 37 /LKW/201 2 (IN ITA NO.177/LKW/2012) ASSESSMENT YEAR:2002 - 03 DY.C.I.T., CENTRAL CIRCLE - 2, KANPUR. PAN:AADHK0228H VS SHRI KISHORE KUMAR KAYA, HUF 53/10, NAYAGANJ, KANPUR. (RESPONDENT) (APPELLANT) SHRI C. P. SINGH, D. R. REVENUE BY SHRI S. K. GARG, ADVOCATE SHRI P. K. KAPOOR, C.A. ASSESSEE BY 17/12/2014 DATE OF HEARING 06 /02/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJECTION IS FILED BY THE ASSESSEE, WHICH ARE DIRECTED AGAINST THE ORDER OF CIT(A) - II, KANPUR DATED 30/01/2012 FOR ASSESSMENT YEAR 2002 - 03. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE I.E. I.T.A. NO.177/LKW/2012. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2 1. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING ASSESSEE'S APPEAL BY HOLDING THAT THE ASSESSMENT WAS INVALID BECAUS E NO NOTICE U/S 143(2) WAS ISSUED WITHIN THE PRESCRIBED TIME, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE IT ACT 1961 DID NOT FILE ANY RETURN OF INCOME AND INFORMED THAT THE RETURN ORIGINALLY FILED ON 06.08.2 002 MAY BE TREATED AS RETURN FILED IN COMPLIANCE TO THE NOTICE U/S 148 OF THE IT ACT 1961. SINCE NO RETURN WAS FILED IN RESPONSE TO NOTICE U/S 148, THE ISSUE OF FRESH NOTICE U/S 143(2) OF THE ACT WAS NOT MANDATORY. REFERENCE TO HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SHRI RAJEEV SHARMA [2010] 192 TAXMAN 197 (ALLD.) IS ERRONEOUS AS THE FACTS OF THIS CASE ARE NOT SIMILAR. NOTICE U/S 143(2) WOULD HAVE BEEN MANDATORY IF A RETURN OF INCOME WAS FILED. IN THE PRESENT CASE, NO RETURN WAS FILED. WITHOUT PREJUDICE TO THE FACTS MENTIONED HEREIN BEFORE, THE LD. CIT(A) HAS ALSO NOT APPRECIATED THE FACTS APPARENT FROM THE ASSESSMENT ORDER THAT THE NOTICES U/S 143(2)/142(1)/ QUESTIONNAIRE WAS ISSUED, CONSEQUENT TO THE SERVICE OF NOTICE U/S 148 OF THE IT ACT 196 1. 2. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THE ASSESSMENT TO BE INVALID AND AT THE SAME TIME DELETING THE ADDITION OF RS.41,76,419/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE IT ACT 1961, WITHOUT APPRECIATING THE FACT TH AT EVEN AFTER BEING PROVIDED OPPORTUNITIES BY ISSUE OF NOTICES U/S 142(1) AND 144 OF THE IT ACT, THE ASSESSEE DID NOT FURNISH DESIRED PROOF TO EXPLAIN THE SOURCES OF INVESTMENT MADE. 3. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THE ASSESSMENT TO BE INVALID AND THUS DELETING THE ADDITION OF RS.41,76,419/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE IT ACT 1961, WITHOUT APPRECIATING THE FACT THAT VALID PROCEEDINGS U/S 147 OF THE IT ACT 1961 WERE INITIATED BY THE A.O. AND ON REQUEST OF THE ASSESSEE THE COPY OF REASONS WERE ALSO PROVIDED TO THE ASSESSEE. THE ASSESSEE DID NOT FURNISH ANY PROOF OF THE SOURCES OF INCOME INVESTED IN THE SAID ACCOUNT, BEFORE THE A.O., TO EXPLAIN THE SOURCE OF INVESTMENT. 3 4. THAT LD. CIT (A) HAS ER RED IN LAW AND ON FACTS IN HOLDING THE ASSESSMENT TO BE INVALID AND THUS DELETING THE ADDITION OF RS.41,76,419/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE IT ACT 1961, WITHOUT APPRECIATING THE FACT THAT THE A.O. WAS CONSTRAINED TO PASS ASSESS MENT ORDER U/S 144 OF THE I.T. ACT 1961, IN ABSENCE OF COMPLIANCE BY THE ASSESSEE. THE PROOFS AND ON THE BASIS OF INFORMATION GATHERED FROM INVESTIGATION WING AS A RESULT OF ENQUIRIES MADE WITH RESPECT TO TRANSACTIONS OF M/S CMS SECURITIES LTD ACCOUNT, WAS INFORMED TO THE ASSESSEE BUT HE FAILED TO DISCHARGE HIS ONUS AS REQUIRED AS PER PROVISIONS OF SECTION 69 OF THE IT ACT 1961. 5. THAT THE APPELLANT CRAVES LEAVE TO AMEND ANY ONE OR MORE OF THE GROUNDS OF THE APPEAL AS STATED ABOVE AS AND WHEN NEED FOR DOI NG SO MAY ARISE. 6. THAT THE ORDER OF THE LD. CIT (A) DESERVES TO BE VACATED AND THE ASSESSMENT ORDER PASSED BY THE A.O. BE RESTORED. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE REGARD ING GROUND NO. 1 OF THE REVENUES APPEAL THAT IT IS NOTED BY CIT(A) ON PAGE NO. 33 THAT NOTICE U/S 148 WAS ISSUED ON 24/05/2006 AND THEREAFTER , NOTICES U/S 143(2) AND 142(1) WERE ISSUED ON 05/09/2006 FIXING COMPLIANCE ON 15/09/2006. IT IS FURTHER NOTED BY CIT(A) ON THE SAME PAGE THAT ON 15/09/2006, THE ASSESSEE FILED RETURN, INTER ALIA, STATING THAT THE ORIGINAL RETURN FILED ON 06/08/2002 MAY KINDLY BE TREATED AS THE RETURN FILED IN COMPLIANCE OF ABOVE NOTICES AND FURTHER SOUGHT THE REASONS TO BELIEVE FOR REOPENING OF THE ASSESSMENT. HE FURTHER SUBMITTED THAT IN VIEW OF THESE FACTS, THE NOTICES ISSUED BY THE ASSESSING OFFICER ON 05/09/2006 CANNOT BE ACCEPTED AS A NOTICE ISSUED AFTER FILING OF RETURN OF INCOME BY THE ASSESSEE BECAUSE THE RETURN WAS FILED ON 15/09/2006 AND NO NOTICE U/S 143(2) WAS ISSUED BY THE ASSESSING OFFICER AFTER THIS DATE AND THEREFORE, CIT(A) IS PERFECTLY RIGHT AS PER WHICH IT WAS 4 HELD BY HIM THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER IS NOT VALID BECAUSE NO PROPER NOTICE WAS ISSUED BY THE ASSESSING OFFICER. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER ON THIS ISSUE. HE SUBMITTED THAT ORDER SHEET ENTRIES OF THE ASSESSING OFFICER ARE AVAILABLE ON PAGES 15 TO 20 OF THE PAPER BOOK AND IN PARTICULAR, OUR ATTENTIO N WAS DRAWN TO PAGE NO. 19 OF THE PAPER BOOK. IT WAS POINTED OUT THAT IT IS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE FILED REPLY WHEREIN HE DEMANDED FOR THE PRODUCTION OF BROKER AND THE ASSESSEE IS DIRECTED TO FILE THE COPY OF RETURN WITH ALL ANNE XURES AS DEMANDED EARLIER VIDE ORDER SHEET ENTRY DATED 18/01/2007. THE NEXT DATE FIXED IS 16/08/2007 FOR ANSWER TO NOTICE DATED 05/09/2006. HE SUBMITTED THAT THIS ORDER SHEET ENTRY SHOULD BE CONSIDERED AS NOTICE ISSUED BY THE ASSESSING OFFICER U/S 143(2) AND SAME IS WITHIN TIME BECAUSE EVEN AS PER THE ASSESSEE, THE RETURN WAS FILED ON 15/09/2006 AND THEREFORE, NOTICE U/S 143(2) CAN BE ISSUED TILL 31/08/2007. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN OUR CONSIDERED OPINION, THE ORDER SHEET ENTRY DATED 03/08/2007 IS NOT IN THE NATURE OF NOTICE U/S 143(2) OF THE ACT AND THEREFORE, THIS ARGUMENT OF LEARNED D.R. OF THE REVENUE HAS NO MERIT. THIS IS BY NOW A SETTLED POSITION OF LAW THAT IF THE ASSESSEE FILES THE RETURN OF INCOME AND THE ASSESSING OFFICER IS NOT SATISFIED WITH THE SAME AND HE WANTS TO MAKE SAME AMENDMENT IN THE INCOME, HE HAS TO ISSUE NOTICE U/S 143(2) WITH IN THE RELEVANT PERIOD . T HE ASSESSING OFFICER WAS SUPPOSE D TO ISSUE NOTICE U/S 143(2) WITHIN A PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FILED BY THE ASSESSEE. IN THE PRESENT CASE, THE RETURN WAS FILED ON 15/09/2006 BY WAY OF FILING OF LETTER BEFORE THE ASSESSING OFFICER TO THE EFFECT THAT THE ORIGINAL RETURN FILED BY THE ASSESSEE SHOULD BE TREATED AS RETURN FILED IN COMPLIANCE TO NOTICE U/S 148 OF THE ACT. HENCE, IT HAS TO BE TAKEN THAT THE RETURN IN QUESTION WAS FILED BY THE ASSESSEE ON 15/09/2006 AND THEREFORE, NOTICE ISSUED BY THE ASSESSING 5 OFFICER U/S 143(2) ON 05/09/2006 CANNOT BE CONSIDERED AS NOTICE AFTER FILING THE RETURN OF INCOME. SINCE NO FURTHER NOTICE U/S 143 (2) WAS ISSUED BY THE ASSESSING OFFICER, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF ACIT VS. HOTEL BLUE MOON [2010] 188 TAXMAN 113 (SC) AND THE ORDER OF CIT(A) IS ON THE SAME LINE AS PER PARA 41 OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFEREN CE: - 41. MOREOVER, THE AFOREMENTIONED DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. PAWAN GUPTA (SUPRA) WAS SUBJECT - MATTER OF APPEAL BY THE REVENUE BEFORE THE HON'BLE SUPREME COURT WHICH HAS BEEN DISPOSED OF WITH THE CASE, NAMELY, CIT V. HO TEL BLUE MOON' (2010) 188 TAXMAN 113, WHEREIN THEIR LORDSHIPS HAVE UPHELD THE VIEW TAKEN BY THE DELHI HIGH COURT. THEIR LORDSHIPS OF APEX COURT IN THE SAID CASE HAVE CLEARLY OBSERVED THAT WHERE THE ASSESSING OFFICER IN REPUDIATION OF THE RETURN FILED PROCE EDS TO MAKE AN INQUIRY, HE HAS TO NECESSARILY FOLLOW THE PROVISIONS OF SECTION 142, SUB SECTIONS (2) AND (3) OF SECTION 143. THE RELEVANT OBSERVATIONS ARE REPRODUCED BELOW: 'THE CASE OF THE REVENUE IS THAT THE EXPRESSION SO FAR AS MAY BE APPLY INDICATES THAT IT IS NOT EXPECTED TO FOLLOW THE PROVISIONS OF SECTION 142, SUB - SECTIONS (2) AND (3) OF SECTION 143 STRICTLY (OR THE PURPOSE OF BLOCK ASSESSMENTS. WE DO NOT AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE REVENUE, SINCE WE DO NOT SEE ANY REA SON TO RESTRICT THE SCOPE AND MEANING OF THE EXPRESSION SO FAR AS MAY BE APPLY. IN OUR VIEW, WHERE THE ASSESSING OFFICER IN REPUDIATION OF THE RETURN FILED UNDER SECTION 158BC(A) PROCEEDS TO MAKE AN ENQUIRY, HE HAS NECESSARILY TO FOLLOW THE PROVISIONS OF S ECTION 142, SUB - SECTIONS (2) AND (3) OF SECTION 143.' THEIR LORDSHIPS HAVE OBSERVED THAT OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE AND, THEREFORE, T HE REQUIREMENT OF NOTICE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH. THE RELEVANT OBSERVATIONS ARE AS UNDER: 6 'AN ANALYSIS OF THIS SUB - SECTION INDICATES THAT AFTER THE RETURN IS FILED, THIS CLAUSE ENABLES THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT BY FOLLOWING THE PROCEDURE LIKE ISSUE OF NOTICE UNDER SECTION 143(2)/142 AND COMPLETE THE ASSESSMENT UNDER SECTION 143(3). THIS SECTION DOES NOT PROVIDE FOR ACCEPTING THE RETURN AS PROVIDED UNDER SECTION 143( 1 )(A). THE ASSESSING OFFICER HAS TO COMPLETE TH E ASSESSMENT UNDER SECTION 143(3) ONLY. IN CASE OF DEFAULT IN NOT FILING THE RETURN OR NOT COMPLYING WITH THE NOTICE UNDER SECTION 143(2)/142, THE ASSESSING OFFICER IS AUTHORIZED TO COMPLETE THE ASSESSMENT EX PARTE UNDER SECTION 144. CLAUSE (B) OF SECTION 158BC BY REFERRING TO SECTION 143(2) AND (3) WOULD APPEAR TO IMPLY THAT THE PROVISIONS OF SECTION 143(1) ARE EXCLUDED. BUT, SECTION 143(2) ITSELF BECOMES NECESSARY ONLY WHERE IT BECOMES NECESSARY TO CHECK THE RETURN, SO THAT WHERE BLOCK RETURN CONFORMS TO THE UNDISCLOSED INCOME INFERRED BY THE AUTHORITIES, THERE IS NO REASON, WHY THE AUTHORITIES SHOULD ISSUE NOTICE UNDER SECTION 143(2). HOWEVER, IF ON ASSESSMENT IS TO BE COMPLETED UNDER SECTION 143(3) READ WITH SECTION 158BC, NOTICE UNDER SECTION 143(2) SHO ULD BE ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF BLOCK RETURN. OMISSION ON THE PART OF THE ASSESSING AUTHORITY TO ISSUE NOTICE UNDER SECTION 143(2) CANNOT BE A PROCEDURAL IRREGULARITY AND THE SAME IS NOT CURABLE AND, THEREFORE, THE REQUIREMENT OF N OTICE UNDER SECTION 143(2) CANNOT BE DISPENSED WITH.' FROM THE ABOVE, IT IS CLEAR THAT IN A CASE WHERE RETURN IS FILED AND ASSESSING OFFICER IS NOT SATISFIED WITH THE RETURN SO FILED AND HE ALSO PROCEEDS TO MAKE THE A S S ESSMENT, THEN, UNLESS NOTICE UNDER SECTION 143(2) IS ISSUED, ASSESSMENT CANNOT BE VOLIDLY FRAMED. IN THE RESULT, THE APPEAL IS ALLOWED. 6. SINCE LEARNED D.R. OF THE REVENUE COULD NOT SHOW THAT ANY NOTICE U/S 143(2) WAS ISSUED BY THE ASSESSING OFFICER AFTER 15/09/2006, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE BECAUSE IN THE ABSENCE OF ANY VALID NOTICE BY THE ASSESSING OFFICER U/S 143(2) AFTER FILING OF RETURN OF INCOME , THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE 7 ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF HOTEL BLUE MOON (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE APEX COURT, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. GROUND NO. 1 IS REJECTED. 7. IN VIEW OUR DECISION WITH REGARD TO GROUND NO.1 OF APPEAL, THE OTHER GROUNDS RAISED BY THE REVENUE DO NOT CALL FOR ANY ADJUDICATION BECAUSE WHEN THE ASSESSMENT ITSELF IS NOT VALID, NO ADDITION SURVIVES AND HENCE, NO OTHER ISSUE IS REQUIRED TO BE DECIDED SEPARATELY. 8. IN THE RESULT, THE AP PEAL OF THE REVENUE STANDS DISMISSED. 9. NOW WE TAKE UP THE CROSS OBJECTION OF THE ASSESSEE I.E. C.O.NO.37/LKW/2012. IN THIS CROSS OBJECTION THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE ON A DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE AS WERE AVAILABLE ON RECORD, PARTICULARLY THAT ( A ) THE CREDITS AGGREGATING RS.41,76,419/ - AS APPEARING IN THE BANK ACCOUNT NO. SB9308 WITH UNION BANK OF INDIA, GENERALGANJ BRANCH, KANPUR WERE ATTRIBUTABLE TO WELL DEFINED SOURCES (AS NOTED BY THE ASSESSING OFFICER HIMSELF IN PARA 3 OF THE ASSESSMENT ORDER) ( B ) SUCH CREDITS STOOD SELF PROVED AND NO FURTHER INFORMATION WAS REQUIRED TO BE GIVEN BY THE ASSESSEE; THE LD. CIT(A) - 2 KANPUR SHOULD HAVE HELD, FOR THE SAKE OF COMPLETENESS OF DISPOSAL OF APPEAL, THAT EVEN ON MERITS, NO ADDITION WAS CALLED FOR AND JUSTIFIED. 2. BECAUSE THE LETTER OF LAW OF SECTION 69 STOOD FULLY COMPLIED WITH, AND ON THE FACTS OF THE CASE THE PROVISIONS CONTAINED IN SAID SECTION COULD NOT HAVE BEEN INVOKED TO MAKE THE ADDITION OF RS.41,76,419/ - AS HAD BEEN IMPUGNED IN THE APPEAL. 8 10. IN VIEW OF OUR DECISION WITH REGARD TO GROUND NO. 1 OF THE REVENUES APPEAL, THE ISSUES RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION HAVE BECOME INFRUCTUOUS BECAUSE WHEN THE ASSESSMENT ITSELF HAS BE EN QUASHED FOR WANT OF PROPER NOTICE U/S 143(2), NO ADDITION SURVIVES. 11. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESSEE STANDS DISMISSED. 12. IN THE COMBINED RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06 / 0 2 /2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR