Sanyog Kohli, Muzaffarnagar V. ITO, Ward-2(3), Muzaffarnagar

ITA 2099/DEL/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1224 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-09-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 26-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Reason to believe
• Section: 147; 148; 143(3); 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “SMC” : DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA.No.2099/Del./2018 Assessment Year 2009-10 Shri Sanyog Kohli, 109-B, Naveen Mandi Asthal, Muzaffarnagar. PAN ADLPK1737G [vs. The Income Tax Officer, Ward-2(3), Muzaffarnagar. (Appellant) (Respondent) For Assessee : Shri Ankit Gupta, Advocate For Revenue : Shri Anuj Garg, Sr. DR Date of Hearing : 27.09.2022 Date of Pronouncement : 11.10.2022 ORDER This appeal by Assessee has been directed against the Order of the Ld. CIT(A), Muzaffarnagar, dated 13.12.2017 relating to A.Y. 2009-10. 2. Briefly stated facts of the case are that the assessee is an individual and derives income from brokerage. During the year under consideration the assessee filed his return of income on 24.07.2009 declaring income of Rs.1,42,945/-. On the basis of AIR information, 2 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. the case was selected for scrutiny under section 147 of the I.T. Act, 1961 and statutory notice under section 148 of the I.T. Act, 1961 was issued on 29.03.2016 after recording the satisfaction of Ld. PCIT, Muzaffarnagar, which was duly served upon the assessee through speed post. Thereafter, notices under section 142(1) and 143(2) of the I.T. Act, 1961 were issued on 07.10.2016 and 18.11.2016 respectively along with detailed questionnaire to the assessee. In compliance to the statutory notices issued and served, the Authorised Representative of the Assessee appeared before the A.O. from time to time and filed the required details and documents. During the course of assessment proceedings, the assessee was asked to produce documentary evidences regarding his business activities. However, the assessee neither produced any books of account nor produced any evidences regarding his business. The assessee vide reply dated 16.11.2016 submitted that he had maintained a diary for recording the financial transactions made by him and at present the diary has been misplaced since the matter is very old. The assessee is maintaining bank A/c with Punjab 3 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. National Bank, Neveen Mandi Sthal, Muzaffarnagar during the year under consideration and as the assessee failed to produce any evidences regarding his business, the peak credit balance amounting to Rs.5 lakhs in the bank account is added to the income of the assessee and the A.O. accordingly computed the total income of the assessee at Rs.6,42,945/- under section 143(3)/147 of the I.T. Act, 1961 as against the returned income of Rs.1,42,945/- by the assessee and initiated penalty proceedings separately. 2.1. Aggrieved by the order of the A.O. the assessee carried the matter in appeal before the Ld. CIT(A) who vide order dated 13.12.2017 partly allowed the appeal of assessee by reducing the addition to the extent of Rs.3,77,769/- as against the addition of Rs.5 lakhs made by the A.O. 3. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by challenging the notice issued under section 148 and re-assessment order passed under section 147 r.w.s. 143(3) as illegal, bad in law 4 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. and without jurisdiction besides challenging the addition on merits. 4. During the course of hearing, the Learned Counsel for the Assessee drew the attention of the Bench Paper Book Page-A which is pertains to the notice issued by the A.O. under section 148 of the I.T. Act, 1961 reads as under : “Shri Sanyog Kohali S/o Shri Amar Nath Opp. Jain Inter College Muzaffarnagar A.Y. 2009-10 Notice for Selection u/s 148 of the Income Tax Act, 1961:- As per the AIR information available with this office the assessee has deposited cash of Rs.24,73,500/- during F.Y. 2008-09. A query letter in this regard was issued by the undersigned on 12.02.2016 giving opportunity to the assessee to furnish reply on or before 26/02/2016. The letter has been received back with a remark “Left the house” [written in hindi as Makan Chodkar Chele Gaye]. A letter was again sent through Inspector on 01.03. 2016 fixing the date of hearing on 08/03/2016. In response, the assessee submitted copy of ITR-V and computation of income on 08/03/2016. Again a letter was issued on 08.03.2016 5 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. requiring the assessee to submit copy of bank statement along with the source of deposit on 09 03/2016. In response, the assessee submitted written submission on 16/03/2016 stating that the deposit is his income from brokerage during last four or five years and submitted copy of bank statement. However, the assessee has not submitted any other documents to substantiate its claim that it was his income earned during last four or five years. Hence, the cash deposit to the tune of Rs. 24,73,500/- remained unexplained. The assessee has filed his return of income declaring income of Rs.1,42,945/- on 24/07/2009 for the year under consideration. In view of the above, I have reason to believe that the income of the assessee amounting to Rs.24,73,500/- has escaped assessment for A.Y. 2009-10 within the meaning of provisions of section 147 of the Income Tax Act, 1961. Hence, it is imperative to issue notice u/s 148 of the Income Tax Act. 1961. (Pradeep Karnwal) Income Tax Officer Ward-2(3), Muzaffarnagar.” 4.1. The Learned Counsel for the Assessee submitted his arguments to the effect that no proper notice under section 148 has been served upon the assessee and, 6 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. therefore, the assessment framed under section 143(3)/147 of the I.T. Act, 1961 cannot be sustained in the eye of law. He further submitted that since the amount deposited in the Bank A/c of the assessee is out of sale consideration, the A.O. cannot treat the amount as income from undisclosed sources in the hands of assessee. The Learned Counsel for the Assessee by demonstrating his arguments drew the attention of the Bench that the A.O. issued notice under section 148 of the I.T. Act, 1961 dated 29.03.2016 and the assessee also filed a reply before the A.O. contending, inter alia, that the impugned notice dated 29.03.2016 is not served upon the assessee being the address is incomplete and wrong, as no house, no. locality is not written in the impugned notice. Further, in Muzaffarnagar there are two Jain Inter Colleges in different localities and, therefore, the notices issued by the A.O. were definitely returned back to the O/o. A.O. The Learned Counsel for the Assessee submitted accordingly submitted that that the notices issued by the A.O. under section 148 of the I.T. Act, 1961 were not served upon the assessee in view of not mentioning 7 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. assessee’s address properly. He submitted that no notice has been served upon the assessee and, therefore, the assessment framed by the A.O. be set aside. He further submitted that the reasons for reopening of the assessment under section 147 has not been supplied to the assessee by the lower authorities and on this ground also the assessment framed by the A.O. under section 143(3)/147 of the I.T. Act, 1961 and consequent confirmation of part addition by the Ld. CIT(A) cannot be sustained in the eye of law. In support of his contentions, the Learned Counsel for the Assessee relied upon the orders of the Coordinate Bench of ITAT, Delhi Tribunal in the case of Pramod Kumar Sahai vs., ITO in ITA.No.5758/Del./2013 dated 20.12.2019 and in the case of Shri Bir Bahadur Singh vs., ITO 68 SOT 197 and also the orders of ITAT, Amritsar Bench in the case of Amrik Singh vs., ITO 159 ITD 329 and Gurpal Singh vs., ITO 159 ITD 797 and further relied on the Judgment of Hon’ble Allahabad High Court in the case of Suresh Kumar Sheetlani vs., ITO-1(3) in ITA.No.413 of 2011 dated 14.08.2018 and all the above orders are placed on record. 8 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. The Learned Counsel for the Assessee also placed on record the Judgment of Hon’ble jurisdictional Delhi High Court in the case of CIT vs., Intezar Ali vide ITA.No.162 of 2013 order dated 26.07.2013 in support of his contention that the amount deposited in the Bank A/c of the assessee is out of sale consideration and, therefore, the amount could not be treated as income from undisclosed sources. 5. The Ld. D.R. on the other hand strongly relied on the orders of the lower authorities. He submitted that since the assessee has not furnished any documentary evidences in support of his contention, the A.O. addition made impugned addition. However, in first appeal, the Ld. CIT(A) has granted part relief, after considering the submissions of the assessee. He, prayed that the addition to the extent sustained by the Ld. CIT(A) be confirmed. 6. I have heard the rival submissions of both the parties and perused the material available on record. In the instant case, the Learned Counsel for the Assessee has put- forth is arguments on three counts i.e., no proper notice 9 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. under section 148 of the I.T. Act, 1961 has been served upon the assessee, reasons recorded by the A.O. under section 147 of the I.T. Act, 1961 has not been supplied to the assessee and, therefore, the consequent assessment framed under section 143(3)/147 of the I.T. Act, 1961 by the A.O. cannot be sustained in the eye of law and be annulled and the other argument of the Learned Counsel for the Assessee is that the amount deposited in the Bank A/c of the assessee is out of sale proceeds and, therefore, the same cannot be treated as undisclosed income of assessee and relied on the Orders of Coordinate Benches of Delhi Tribunal and Amritsar Tribunal and Judgment of Hon’ble Allahabad High Court and Hon’ble jurisdictional Delhi High Court in the cases referred to above in the preceding paragraphs. From the careful perusal of the material available on record as well as the judicial precedents relied on by the Learned Counsel for the Assessee, I find some force in the arguments of the Learned Counsel for the Assessee that since the amount deposited in the Bank A/c of the assessee is out of sale proceeds, the authorities below 10 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. cannot treat the same as undisclosed income of the assessee as observed by Hon’ble Delhi High Court in the case of CIT vs., Intezar Ali (supra). With respect to other limb of arguments of the Learned Counsel for the Assessee in the instant case, it is not in dispute that reasons recorded by the Assessing Officer for coming to the belief that income had escaped the assessment, was neither supplied by the Assessing Officer to the assessee; nor the assessment records were produced before the Ld. CIT(A) which is evident from the order of the Ld. CIT(A). The reasons so recorded, if any, have neither been provided to the Ld. CIT(A), nor is there any offer from Revenue’s side to produce the same before the Income Tax Appellate Tribunal. The Ld. Departmental Representative had also admitted at the time of hearing before us, that apart from the assessment order dated 22.12.2016 there was nothing else which can be produced to support the belief arrived at that income had escaped assessment. The validity of assumption of jurisdiction by the Assessing Officer under section 147 read with Section 148 of the I.T. Act, 11 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. 1961 is to be examined on the basis of the reasons recorded by the Assessing Officer for coming to the belief that income had escaped assessment. Such reasons have to be recorded before assumption of Jurisdiction under section 147 of I.T. Act ( i.e. before issue of notice u/s 148 of I.T. Act). Any developments which take place after assumption of jurisdiction under section 147 of I.T. Act (i.e. 148 of I.T. Act) has no relevance for deciding whether the AO had reason to believe, before assumption of jurisdiction under section 147 of I.T. Act ( i.e. before issue of notice u/s 148 of I.T. Act) that income had escaped assessment. When such reasons are not made available by Revenue either to the assessee or to the appellate authorities [Ld. CIT(A) as well as ITAT]; I have to conclude that the onus has not been discharged by Revenue to justify assumption of jurisdiction under section 147 of I.T. Act through issue of notice under section 148 of Income Tax Act. When the assumption of jurisdiction under section 147 read with section 148 of I.T. Act lacks validity, the resultant 12 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. assessment order lacks legitimacy. On this ground alone, the aforesaid assessment order dated 22.12.2016 deserves to be annulled. I have further noticed that the Assessing Officer has not furnished reasons for issue of notice under section 148 of I.T. Act to the assessee and the said notice is also not served upon the assessee as wrong address is mentioned. In this connection, I may point that the Assessing Officer is bound to provide reasons recorded by him for issue of notice under section 148 of I.T. Act, 1961 to the assessee as per the Judgment of Hon’ble Supreme Court in the case GKN Driveshafts (India) Ltd. vs. ITO (2003) 259 ITR 19. The ld. DR had admitted that no proceedings were pending before the AO prior to issue of notice under section 148 of I.T. Act, 1961. Thus, I find that the Assessing Officer has conducted inquiries without authority of law before issue of notice under section 148 of I.T. Act, 1961. Thus, the assumption of jurisdiction by the A.O. under section 147 of I.T. Act read with section 148 of I.T. Act, 1961 is based on inquiries conducted without the authority of law. I am of the firm 13 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. view that assumption of jurisdiction under section 147 r.w.s. 148 of I.T. Act, 1961 on the basis of inquiries conducted without the authority of law lacks legitimacy. Assumption of jurisdiction must be held to be unauthorized, when the inquiries made for assuming the jurisdiction were unauthorized in law and the assessment order passed in pursuance of unauthorized assumption of jurisdiction under section 147 r.w.s. 148 of I.T. Act, also lacks legitimacy. On this ground also, the assessment order dated 22.12.2016 deserves to be annulled. Accordingly, I set aside the impugned order dated 13.12.2017 of Ld. CIT(A); and annul the aforesaid assessment order dated 22.12.2016. Resultantly, the addition stand deleted. Accordingly, appeal of the assessee is allowed. 7. In the result, appeal of the Assessee is allowed. Order pronounced in the open Court on 11.10.2022. Sd/- [CHANDRA MOHAN GARG] JUDICIAL MEMBER Delhi, Dated 11 th October, 2022 VBP/- 14 ITA.No.2099/Del./2018 Shri Sanyog Kohli, Muzaffarnagar. Copy to 1. The appellant 2. The respondent 3. Ld. CIT(A) concerned 4. CIT concerned 5. DR ITAT “SMC” Bench, Delhi 6. Guard File //By Order// Assistant Registrar, ITAT, Delhi Benches, Delhi.