Shri Ketan C. Sheth, Ahmedabad V. ITO, Ward-3(3)(2), Ahmedabad

ITA 1823/AHD/2018

AI Insights

The case involves Shri Ketan C. Sheth appealing against the order of the Commissioner of Income-tax (Appeals)-3, Ahmedabad, which upheld the re-assessment proceedings and confirmed the addition of Rs. 44,24,500 to the assessee's income for the assessment year 2009-10. The re-assessment was based on the observation that a significant amount was deposited in the assessee's bank account, allegedly transferred from another individual's account, which was under scrutiny for similar financial discrepancies. The ITAT found that the reasons recorded for the re-opening of the case were justifiable and that the notice under Section 148 was validly issued. However, the ITAT also noted that the assessee was not given a proper opportunity to present his case on merits before the CIT(A), leading to the decision to remand the matter back for a detailed examination on these grounds.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300003 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 19-04-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 22-08-2018
• Other Referred Cases: Bir Bahadur Singh Sijwali v/s ITO, Mariyam Ismail Rajwani v/s ITO, PCIT v/s Meenakshi Overseas P. Limited, ACIT v/s Hotel Blue Moon, CIT v/s Sukhini P. Modi
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Condonation of delay; Borrowed satisfaction
• Section: 69; 148; 144; 139; 143(3); 142(1); 69B; 143(2); 43; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I. T .A . N o .1 82 3 / Ah d/2 0 1 8 ( A s se ss m e nt Y e a r : 20 09- 10 ) Sh r i K e ta n C . S h e t h 87, P a ya l P a r k So c i et y, Op p. N i r ma Ho us e, J o d h pu r Te kr a , Ah me da bad V s . I T O War d - 3 ( 3) ( 2 ) , A h me da ba d [P AN N o.A F A P S3 2 14 B] (Appellant) .. (Respondent) Appellant by : Shri Umedsingh Bhati & Shri Abhimanyu Sinah Bhati, A.Rs. Respondent by: Ms. Chitra Soneji, Sr. D.R. D a t e of H ea r i ng 20.04.2023 D a t e of P r o no u n ce me nt 21.04.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals)-3, Ahmedabad on 18.06.2018 for A.Y. 2009-10. 2. The grounds of appeal raised by the assessee are as under: “1.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in dismissing the appeal of the appellant. 2.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in upholding the re-assessment proceedings even though on records there was no material to have reasonable belief of escapement of income. Further, the Notice u/s 148 dated 29 th March, 2016 was issued without subjective satisfaction and/or independent application of mine by the ld. AO. 3.0 The ld. Commissioner of Appeals erred in law and on facts in upholding the re- assessment proceedings though no notice u/s 143(2) was issued by the ld. A.O. even after calling for a remand report specifically in that regard, whereby the ld. A.O. had not controverted the contentions of the appellant. 4.0 The learned Commissioner of Income-tax (Appeals) further erred in law and on facts in concluding that the ld. A.O. was in possession of specific direction (specific information) from Hon’ble ITAT, Ahmedabad, which is clearly an evidence that appellant had not declared true state of affairs in the return of income. 5.0 The learned Commissioner of Income-tax (Appeals) further erred in law and on facts in The issue of Notice u/s 148 dated 29 th March, 2016 by the learned Assessing Officer was issued merely on the basis ‘suspicion’ in order to conduct fishing and roving enquiries is not sustainable in the eyes of the law and hence the same may be quashed. ITA No. 1823/Ahd/2018 Shri Ketan C. Sheth vs. ITO Asst.Year–2009-10 - 2 - 6.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in not providing an opportunity to the appellant to file submissions on merits though specific request was made before him vide Para 4.0 of the submissions dated 31 st January, 2018. 7.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming the addition of Rs.44,24,500/-. 8.0 The appellant may be allowed to add, amend, alter or raise additional ground of appeal.” 3. The assessee filed his return of income declaring total income of Rs. 3,66,460/- for A.Y. 2009-10 as mentioned in the assessment order. The Assessing Officer observed that the assessee deposited an amount of Rs. 44,24,500/- in his bank account vide No. SB/5379 of Corporation Bank, Satellite Main Road, Ahmedabad. The same was transferred by Shri Milan N. Soni. The Ld. A.R. observed that in case of Shri Milan N. Soni the Assessing Officer made an addition on account of cash deposit amounting to Rs. 44,24,500/- and finalize the order under Section 143(3) for A.Y. 2009-10 on 20.10.2011. The CIT(A) vide order dated 10.10.2012 dismiss the appeal of Shri Milan N. Soni. The Tribunal vide order dated 01.02.2013 in case of Shri Milan N. Soni restored back the appeal to the file of the Assessing Officer with direction to verify the entries in the bank account of Shri Milan N. Soni with the bank account of Shri Chimanlal Jamnadas Sheth and Ketan Sheth or any other family member of the Directors of the business concern. The assessee’s case after recording the reasons was reopened on 29.03.2016 by issuing notice dated 29.03.2016 under Section 148 of the Act. The assessee did not file his return of income and thereafter notice under Section 142(1) dated 27.06.2016 was issued alongwith reason for reopening of case. The Assessing Officer observed that though the assessee has not filed return of income in response to notice under Section 148, the assessee filed his return of income under Section 139 declaring total income at Rs. 3,66,460/- as per Para 1 of assessment order and income at Rs. 7,65,100/- as per Page No. 2 of the assessment order. The Assessing Officer issued show-cause notice as to why cash deposit of Rs. ITA No. 1823/Ahd/2018 Shri Ketan C. Sheth vs. ITO Asst.Year–2009-10 - 3 - 44,24,500/- should not be treated as unexplained investment under Section 69 / Amount of Investment etc. not fully disclosed in the books of account under Section 69B of the Act. The assessee did not file any documents / agreements / bills in this regard and therefore, show-cause in respect of finalizing the assessment under Section 144 of the Act was issued to the assessee. The Assessing Officer vide assessment order under Section 143(3) r.w.s. 147 of the Act dated 15.12.2016 assessed the income of the assessee at Rs. 44,24,500/-. 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee. 5. There is delay of 3 days in filing the appeal before the Tribunal which was explained by the assessee by filing condonation of delay application. The reason stated therein appears to be genuine and therefore, the delay is condoned. 6. As regards, Ground No. 1 the Ld. A.R. submitted that the same is in general. Hence, not adjudicate at this juncture. 7. Ground Nos. 2.0, 4,0 and 5.0 the Ld. A.R. submitted as follows: “1. A complete set of ‘reasons' recorded has been placed on record on 08.12.21 as per the directions of Hon'ble Bench on 08.12.21. It is evident from the 'reasons' that in the first two paragraphs the ld. A.O. had set out information extracted from the material available on record to the extent that the appellant had deposited an amount of Rs.44,24,500/- in his bank account and second about the finding of the Hon'ble Tribunal in the case of Shri Milan Soni, that, if transfer of money from Shri Soni's bank account is reconcilable with that of the appellant's or his family members bank accounts then not to make any addition in the hands of Shri Soni. Thereafter, he immediately jumped to the conclusion in third para that as per material available on record, he had reason to believe that income chargeable to tax amounting to Rs. 44,24,500/- had escaped assessment. Therefore, in view of the above, Notice issued u/s 148 dated 29.03.2016 suffer from following infirmities, as per the settled position of law: - ITA No. 1823/Ahd/2018 Shri Ketan C. Sheth vs. ITO Asst.Year–2009-10 - 4 - (a) 'Reasons' do not contain any 'reasoning'. It is no-where mentioned that deposits made in bank account constituted 'income' (or unaccounted income), which has escaped assessment. The reasons recorded for re-opening are to be examined on a standalone basis and nothing can be added to the reasons. (b) Notice had been issued merely on borrowed satisfaction i.e finding of the Hon'ble Tribunal in the matter of Shri Milan Soni (third person). The Ld. CIT(A) has also erred in concluding that A.O. was in possession of specific direction from Hon'ble Tribunal [Para 4, Page 11 of CIT(A)'s order]. The Hon'ble Tribunal had not given any specific direction against the appellant as he was not a party before it in the case of Shri Soni. (c) There is absence of live link between information/ material and formation of belief of escapement of income by the Id. A.O. Mere deposits in bank account do not mean that there is escapement because the amount may be a loan or repayment of loan or it may be from explained sources, etc. as held in Bir Bahadur Singh Sijwali v/s ITO (2015) 43 CCH 0153 Del Trib &. Mariyam Ismail Rajwani v/s ITO (2016) 48 CCH 0493 Ahd Trib. Copies of above judgements are enclosed herewith. For example, it is crucial to note that in absence of any observation by the Id. A.O. in the reasons recorded that the appellant's own money was routed through Shri Soni's bank account, no nexus could be established between the information and reason to believe. In this connection reliance is placed on the enclosed judgement of Hon'ble Delhi High Court in the case of PCIT v/s Meenakshi Overseas P. Limited [2017] 82 taxmann.com 300 (Del). (d) The A.O. had failed to carry out any independent enquiry and there is non- application of mind by the Id. A.O.” 8. The Ld. D.R. submitted that the reasons recorded by the Assessing Officer as well as the concerned authorities were just and proper and after the case of Shri Milan N. Soni was finalized by the Tribunal the assessee’s case on the basis of deposited amount transfer from Shri Milan N. Soni to assessee’s account was reopen. Therefore, Ground Nos. 2, 4 and 5 are just and proper. 9. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee / the Ld. A.R. has not stated that the reasons recorded was outside the scope of the observations made by the Tribunal in case of Shri Milan N. Soni. In fact, in case of Shri Milan N. Soni the transfer of money to assessee’s account and the assessee’s name was categorically mentioned in the order and therefore, the reasons recorded were ITA No. 1823/Ahd/2018 Shri Ketan C. Sheth vs. ITO Asst.Year–2009-10 - 5 - justifiable. The notice issued under Section 148 was also technically signed and there is no discrepancy pointed out by the Ld. A.R. at the time of hearing. The decisions cited by the assessee / Ld. A.R. are distinguishable in facts especially the decisions of Hon’ble Delhi High Court in case of PCIT vs. Meenakshi Overseas (P.) Ltd. (2017) 82 taxmann.com 300 (Delhi) wherein the reopening was in respect of the information about the assessee therein taken after paying unaccounted cash to the accommodation entry given. But in this case in the present assessee has been categorically mentioned and from the records of the bank account which the Ld. A.R. submitted that the bank account does not belong to assessee, yet the actual account of the assessee i.e. Ketan C. Sheth has given various entries where the assessee received certain amount during A.Y. 2009-10 from Shri Milan N. Soni. Therefore, the reasons recorded and the reopening under Section 147 is justifiable and there is no need to interference with the findings of the CIT(A). Thus, Ground Nos. 2.0, 4.0 and 5.0 are dismissed. 10. As regards, Ground No. 3 the Ld. A.R. submitted that in response to notice under Section 142(1) the assessee vide its letter date d07.09.2016 filed income tax return acknowledgement with statement of income, however, the Assessing Officer failed to issue notice under Section 143(2) and completed the assessment which is invalid in absence of notice under Section 143(2) as held by the Supreme Court in case of ACIT vs. Hotel Blue Moon 312 ITR 362 (SC) and Hon’ble Gujarat High Court in case of CIT vs. Sukhini P. Modi 367 ITR 882 (Guj.). The Ld. A.R. submitted that the specific ground was raised before the CIT(A) during the appellate proceedings and the CIT(A) called the remand report from the Assessing Officer and the Assessing Officer did not deny the fact that there was failure to issue notice under Section 143(2). ITA No. 1823/Ahd/2018 Shri Ketan C. Sheth vs. ITO Asst.Year–2009-10 - 6 - Therefore, the Ld. A.R. submitted that the assessment order becomes null and void. 11. The Ld. D.R. submitted that the assessee has filed return of income and the notice under Section 143(2) was not necessary to issue, though, from the assessment order or from the record it does not appear that the same was not issued. The case was reopen and the statutory notice under Section 148 has been issued to the assessee and therefore, the decision of Hon’ble Supreme Court as well as Hon’ble Gujarat High Court will not be applicable in the present case. 12. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee filed the return of income under Section 139 and though not responded the notice under Section 148 the Assessing Officer has issued the statutory notice under Section 148 and notice under Section 142(1). The factual matrix in the present assessee’s case are different than in the case of Hotel Blue Moon (Supra) decided by the Hon’ble Supreme Court. Therefore, the decision of Hon’ble Supreme Court will not be in toto applicable in present assessee’s case. In remand report the Assessing Officer though not denied yet he has also not stated that notice under Section 143(2) was never issued. In fact, the assessee vide letter dated 07.09.2016 has replied the show-cause notice issued under Section 142(1) to the Assessing Officer and therefore, participated in the assessment proceedings under Section 148 r.w.s. 147 of the Act. Thus, Ground No. 3 does not sustain. 13. As regards, Ground No. 6 the Ld. A.R. submitted that the CIT(A) has not allowed the assessee to make its submission on merit and merely rejected the appeal on technical grounds. Therefore, the Ld. A.R. submitted that the ITA No. 1823/Ahd/2018 Shri Ketan C. Sheth vs. ITO Asst.Year–2009-10 - 7 - CIT(A) should be given the opportunity of the assessee to submit its case on merit. 14. The Ld. D.R. relied upon the assessment order and the order of the CIT(A). 15. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that since the technical ground has been confirmed hereinabove it will be appropriate to remand back the issues contested by the assessee on merit before the CIT(A) and the CIT(A) after taking the proper cognizance of the evidence and adjudication / verification decide the case on merit. Needless to say the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 6 is partly allowed for statistical purposes. 16. In the result, appeal of the assessee is partly allowed for statistical purposes. This Order pronounced in Open Court on 21/04/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 21/04/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/ Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad