Neeru Mittal, Ludhiana V. ITO, Ward - 4(3), Ludhiana

ITA 435/CHANDI/2021

AI Insights

Neeru Mittal appealed against the order of the CIT(A), which had sustained the assessment made by the Assessing Officer (AO) under sections 147/143(3) of the Income Tax Act, 1961. The primary contention was the validity of the notice issued under section 148, which was claimed to be issued without proper jurisdictional authority as the approval from the PCIT was obtained after the issuance of the notice. The Tribunal examined the timelines and procedural adherence in issuing the notice and found discrepancies that led to the conclusion that the notice was void ab initio. The Tribunal's decision emphasized the importance of procedural compliance in tax assessments, particularly the need for prior approval from the competent authority before issuing notices under section 148.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127564 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 14-03-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2021
• Other Referred Cases: ITO vs Ashok Jain, ACIT Vs. Resham Petrotech Ltd., ITO Vs. Rajender Prasad Gupta, GKN Sinter Metals Ltd. Vs. Ramapriya Raghavan (Ms.), ACIT, M/s Larsen & Turbo Ltd vs State of Jharkhand and others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Invalid notice; Principle of natural justice; Opportunity of cross examination; Accommodation entries; Competent authority; Assessment record; Reason to believe; Capital Gains
• Section: 68; 148; 143(3); 142(1); 143(1); 143(2); 48

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “एस.एम.सी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH ी व म संह यादव, लेखा सद%य BEFORE: SHRI. VIKRAM SINGH YADAV, AM ITA No. 435/Chd/2021 Assessment Year : 2011-12 Neeru Mittal 939, Focal Point Road- Sherpur Ludhiana-141002, Punjab The ITO, Ward-4(3), Ludhiana PAN NO: AJDPM8691F Appellant Respondent ! " Assessee by : Shri Sarabjit Garg, CA # ! " Revenue by : Smt. Tarundeep Kaur, Sr. DR $ % ! & Date of Hearing : 15/03/2023 '()* ! & Date of Pronouncement : 12.06.2023 आदेश/Order PER VIKRAM SINGH YADAV, AM: This is an appeal filed by the Assessee against the order of the Ld. CIT(A), NFAC, Delhi passed under section 250(6) of the Income Tax Act, 1961 (in short ‘the Act’) dt. 28/10/2021 pertaining to A.Y. 2011-12 wherein the assessee has taken the following grounds of appeal: 1. Ground 1. That on the facts and in the circumstances of the case and in law, Ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that assumption of jurisdiction u/s 148 was by Ld. AO was bad in law. 2. Ground 2. That on the facts and in the circumstances of the case and in law, Ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that reassessment proceedings have been conducted without following law of natural justice. 3. Ground 3. That on the facts and in the circumstances of the case and in law, Ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that no addition has been made on the basis of reasons recorded or show cause notice. 2 4. Ground 4. That the assessee craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off.” 2. Briefly the facts of the case are that the assessee had filed her return of income declaring total income of Rs. 5,64,770/- which was processed under section 143(1) of the Act. Thereafter notice under section 148 was issued on 28/03/2018 which was duly served upon the assessee. In response to the notice under section 148, the assessee filed her return of income on 23/04/2018 declaring total income of Rs. 5,64,770/- as originally declared. Thereafter notice under section 143(2) and 142(1) were issued and assessment was completed under section 143 r.w.s 147 dt. 26/12/2018 wherein the addition of Rs. 12,26,510/- was made under section 68 of the Act. 3. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) wherein the assessment proceedings were challenged both on the legality as well as the merit of the case. However on both the count, the appeal of the assessee was dismissed and against the said findings and the order of the Ld. CIT(A), the assessee is in appeal before us. 4. During the course of hearing, the Ld. AR has challenged the assumption of jurisdiction by the AO under section 147 of the Act on various counts and the submissions of the ld AR as well as that of the ld DR are as under: 5. Firstly, it has been contended that the notice under section 148 is invalid as it has been issued by the AO before seeking the approval by the Ld. Pr. CIT. In this regard, it was submitted that the notice under section 148 is dt. 28/03/2018 wherein the date of approval by the Ld. Pr. CIT is 29/03/2018. It was accordingly submitted that the notice is void ab-initio and consequent assessment proceedings based on such invalid notice is bound to be declared null & void 3 as the same is not in consonance with the express provisions of section 151 of the Act and in support, reliance was placed on ITAT Surat Bench decision in case of ITO vs Ashok Jain (2018) 68 ITR 585 (Sur- Trib). 6. Per contra, the Ld. DR submitted that the notice under section 148 has been validly issued after seeking necessary approval from the Ld. Pr. CIT. In this regard, a copy of the letter received from the AO, ITO W-4(1), Ludhiana dt. 19/09/2022 has been submitted wherein the AO has stated that the online approval has been granted by the Competent authority on 28/03/2018 and a copy of the screenshot from the IT system was attached alongwith said report and it was submitted that the notice under section 148 has thereafter been issued on the same date after receiving online approval. 7. It has been further contended by the Ld. AR that the basic requirement of Section 147 is that the jurisdictional AO must have reason to believe that any income chargeable to tax has escaped assessment and such believe must be of the jurisdictional AO and not of any other AO. It was submitted that in the instant case, the notice under section 148 was issued by the ITO W-6(5) Ludhiana wherein the assessment has been completed by the ITO W-4(3), Ludhiana which cannot be sustained in the eyes of law and in support reliance was placed on the decisions in case of ACIT Vs. Resham Petrotech Ltd. (2012)136 ITD 185 (Ahd. Trib), and ITO Vs. Rajender Prasad Gupta (2010) 48 DTR 489 (Jd Trib) 8. Per contra, the Ld. DR submitted that the assessment order itself shows that the notice under section 148 was issued by the ITR W-4(3), Ludhiana and the assessment proceedings under section 143(3) r.w.s 147 was also completed by the ITO W-4(3), Ludhiana. Further the assessee has not furnished any details with respect to the correct jurisdictional authority in support of her above argument. It was further submitted that the assessee has not raised the said ground during the course of the assessment proceedings and therefore the assessee cannot 4 be permitted to raise the said ground at the stage for the first time before the Tribunal. 9. It was further submitted that the reasons to believe which have been recorded by the AO indicate non-application of mind by the AO as well as the approving authority. In this regard, reference was drawn to the reasons recorded by the AO prior to the issuance of notice under section 148 of the Act. It was submitted that as per the reasons so recorded, the AO has stated that the assessee has purchased shares of M/s Twenty First Century (India) Ltd. whereas the fact of the matter is that the assessee has not purchased rather sold the shares of M/s Twenty First Century (India) Ltd. during the Financial Year relevant to the impugned assessment year. It was submitted that the assessee has in fact purchased shares of Sarathi Dealers P. Ltd. and thereafter that company was merged into M/s Twenty First Century (India) Ltd. as per the order of the Hon’ble Calcutta High Court and pursuant to the merger, 3800 shares were allotted to the assessee in lieu of her holding in Sarathi Dealers P. Ltd. as per the scheme of amalgamation. It was submitted that the purchase of the shares happened in the F.Y. 2009-10 and not in the F.Y. relevant to the impugned A.Y and infact during the year under consideration, the assessee has sold the shares. It was submitted that the AO has solely relied on the information received from the Investigation Wing and there is no independent application of mind by the AO. 10. It was further submitted that in the order disposing off the assessee’s objections to the reasons so recorded, the AO has admitted that it was an inadvertent error wherein in the reasons recorded purchase was mentioned instead of sale. It was submitted that it is not open to the AO to improve upon the reasons recorded at the time of issuance of the notice either by adding an/or substituting the reasons by affidavit or otherwise as held by the Bombay 5 High Court in case of GKN Sinter Metals Ltd. Vs. Ramapriya Raghavan (Ms.), ACIT (2015) 371 ITR 225. 11. It was further submitted that even the Ld. Pr. CIT while granting the approval has not noticed such a glaring mistake and hence even the approval so granted has been granted mechanically without application of mind and which cannot be sustained in the eyes of law. 12. Per contra, the Ld. DR submitted that the assessment in this case was reopened under section 147 on the basis of specific findings of the DIT(Investigation), Kolkata that the assessee had obtained accommodation entry from Twenty First Century (India) Ltd. to the tune of Rs 12,28,920/- and basis such tangible material and after due consideration, the AO has recorded reasons that the income has escaped assessment within the meaning of Section 147 of the Act. It was submitted that the assessee has not been disputed the fact that the transaction from Twenty First Century (India) Ltd. to the tune of Rs 12,28,920/- pertains to her and merely the fact that instead of sale transaction, the AO has mentioned the purchase transaction is merely an inadvertent mistake and the same cannot be fatal to the whole of the proceedings initiated by the AO after seeking due approval from the Competent authority. 13. It has been further contended by the ld AR that the reopening has been made by the AO on the basis of statement of third party which was neither confronted to the assessee nor crosss examination was allowed despite specific request. In this regard, our reference was drawn to the objection dt. 02/11/2018 filed by the assessee in response to the issuance of notice under section 148 of the Act wherein in para 8, it has been specifically requested that where the Department intend to continue with the proceedings under section 148, it is requested that the copy of the information received from the Investigation Wing 6 alongwith all the relevant material may kindly be supplied to the assessee to enable her to lead her defense in the matter. It was submitted that while disposing off the assessee’s objection vide order dt. 04/12/2018, it has been stated that the common inquiry report alongwith list of beneficiaries has been received from the Investigation Wing and in the reasons recorded, all the facts relating to the case have been discussed in details, however, the statement and other material was not provided. Thereafter, reference was drawn to the letter dt. 10/12/2018 written by the assessee to ITO, Ward-IV(3) wherein the assessee had again requested for the copy of the statement and other material relied upon. It was accordingly submitted that neither at the time of recording the reasons or while disposal off the assessee’s objections against the said reasons and even during the course of assessment proceedings, the assessee has not been provided any statement or material relied upon by the AO nor any opportunity to cross examine the person was provided despite specific request. It was submitted that the assessee was prevented both at the initial stage and even during the assessment stage in terms of having access to the information which has been relied upon by the AO against the assessee and without providing opportunity of cross examination which is against the law of natural justice and in support reliance was placed on the decision of Hon’ble Supreme Court in case of Rajiv Arora Vs. Union of India and Ors. AIT 2009 SC 1100(SC) and Andaman Tiber Industries Vs. Commissioner of C. Ex., Kolkata-II. 14. Per contra, the ld DR submitted that in the report of the DDIT(Inv), Unit 4(1), Kolkata, it is clearly reported that M/s Twenty First Century (India) Ltd is a paper company which was used to provide entries of bogus long term capital gains. It was also reported that Shri Anil Kumar Khemka who was managing and controlling the company admitted in his statement recorded on 14/04/2017 that all the transactions including the merger of Sarathi Dealer Pvt Ltd and other companies with M/s Twenty First Century (India) Ltd were pre-arranged to 7 provide accommodation entries to the beneficiaries. It was submitted that the assessment in the present case was reopened on the basis of above report of DDIT(Inv) and reliance was placed on the Hon’ble Supreme Court decision in case of M/s Larsen & Turbo Ltd vs State of Jharkhand and others (Civil Appeal No. 5390/2007). 15. It is also relevant to note that each of the aforesaid contentions have been raised by the assessee before the ld CIT(A) which have not been accepted by the ld CIT(A) and his findings which are contained in para 7 to 11 of the impugned order. 16. Heard the rival contentions and purused the material available on record. Regarding the first contention which has been raised by the ld AR, section 151 provides that no notice shall be issued under section 148 by an Assessing officer, after the expiry of four years from the end of the relevant assessment year, unless the PCIT/CCIT/PC/CIT is satisfied on the reasons so recorded by the Assessing officer that it is a fit case for issuance of such notice. The essence of the said provisions is therefore recording of satisfaction by the competent authority before the issuance of notice u/s 148 by the Assessing officer. 17. In the instant case, there is no dispute that reasons were recorded by the Assessing officer on 23.03.2018 and after seeking approval from ld PCIT-3, Ludhiana, notice u/s 148 was issued to the assessee on 28.03.2018. The limited question is what’s the date of the grant of such approval by the ld PCIT. As per the ld AR, the approval has been granted physically by the ld PCIT on 29.03.2018, that is, after the issuance of notice u/s 148 on 28.03.2018 whereas as per the ld DR, the approval has been granted online by the ld PCIT on 28.03.2018 and on the same date, notice u/s 148 has been issued by the AO. Regarding the physical copy of the approval, the existence of such approval as 8 emanating from the assessment records is not denied by the ld DR but at the same time, it has been submitted that possibly, there is a typographically mistake while putting the date of approval by the Competent authority and the same should be read as 28.03.2018 and not 29.03.2018 and the same being a technical breach cannot be fatal to the initiation of the proceedings u/s 147 of the Act which otherwise in compliance with the statue. 18. It is no doubt true that the whole purpose of seeking approval and subsequent grant of approval through the IT online portal is to bring efficiency and transparency in the system of tax administration but at the same time, it was felt equally essential to maintain physically records of such matters so that in case of any mis-match, the physical records can be verified to determine the correct facts or vice-versa as mandated by law as we can observe in the present case where the date of grant of approval by the Competent authority is under challenge. 19. In order to resolve the controversy at hand, during the course of hearing, a report from the Assessing officer was called for and the relevant contents of the report submitted by ITO Ward 4(1), Ludhiana read as under: “3(i) In ground No. 1, the assessee has argued that the notice u/s 148 of the act was issued before the date of approval by the Pr. CIT and, therefore, the notice is null and void. The issuance of notice u/s 148 is valid, as online approval has been accorded by the competent authority on 28.03.2018 (screenshot of system attached) for issue of notice and the notice has been issued on the same date after receiving online approval” 20. Whereas the ld AR has submitted a physical copy of the approval granted by the ld PCIT available at APB Page 26 and the contents thereof read as under: 9 10 21. On review of the screen shot of the online approval as submitted by the AO as part of his report, it is observed that both the recommending authority i.e, JCIT, the Range head as well as the approving authority, i.e, the PCIT have recommended and granted the approval on the same day i.e, 28.03.2018 whereas on review of the hard copy of the approval under due signatures of both of these authorities, it is noted that the Range head has recommended the issuance of notice on 26.03.2018 and thereafter, the PCIT has granted his approval on 29.03.2018. 22. We therefore find that there is clearly a mis-match between the date of grant of online approval as well as on the hard copy both by the Range head as well as the final approving authority. The physical copy of the approval under the signatures of both the authorities is available on record and has not been disputed by the Revenue and further, nothing has been brought on record by the Revenue as to why such mis-match is there in two sets of approval. Therefore, the contention of the ld DR that there is a typographically mistake while putting the date of approval by the Competent authority cannot be accepted as there is a mis-match on the dates of online and physical approval by not just one authority but by both the authorities which cannot be a mere coincidence. 23. Considering the well-established principle that the latest order of any competent authority will supersede its earlier order unless stated otherwise, in my overall analysis, I find that the Range head has recommended and granted the approval physically under his signatures on 26.03.2018 and thereafter, online on 28.03.2019 and unless the Range head recommends the matter, the matter cannot proceed further and therefore, the later approval granted by the Range head on 28.03.2019 is taken as the correct date of recommendation. Similarly, the ld. PCIT who is the approving authority in the instant case has granted the 11 approval online on 28.03.2018 and thereafter, physically under his signatures on 29.03.2019 and therefore, the latter approval granted by him is taken as the correct and final date of grant of approval which is 29.03.2019 by the Competent authority for issuance of notice u/s 148 by the Assessing officer. 24. In view of the aforesaid discussions, where the notice u/s 148 has been issued on 28.03.2019 well before the date of grant of approval by the ld PCIT on 29.03.2019, the same is clearly a jurisdictional defect u/s 151 which cannot be cured as it goes to the foundation of the whole of the assessment proceedings u/s 147 and therefore, the consequent assessment proceedings deserve to be set-aside on this ground itself. 25. We find that similar view has been taken by the Coordinate Surat Benches in case of ITO vs Ashok Jain (supra) wherein it has been held that even though the AO has applied for approval but where the approval which forms the foundation for issuance of such notice has been granted subsequent to issuance of notice u/s 148, such notice is void ab initio and the relevant findings read as under: “4. With the assistance of the learned representatives, we have gone through the record carefully. Section 151 of the Income Tax Act, 1961 contemplates that no notice under section 148 shall be issued by the assessing officer, after the expiry of a period of four years from the end of the relevant assessment year, unless necessary approval from the Commissioner or competent authority is obtained. No doubt in the present case, the learned assessing officer has applied for such approval which was granted on 29-3-2017, but before grant of approval, the learned assessing officer has already issued notice on 28-3-2014 which is without any jurisdiction. He can issue notice only after getting approval. Thus, the learned Commissioner (Appeals) has rightly quashed the assessment because the very foundation for issuance of notice under section 148 is the approval from the competent authority, i.e. the Commissioner, and in the absence of such, such notice is void ab initio. Considering the above, we do not find any merit in this appeal of the Revenue. It is dismissed, 12 26. In view of the aforesaid, the other contentions raised by the ld AR have become academic and the same are dismissed as infructious. 27. In the result, the appeal of the assessee is allowed. (Order pronounced in the open Court on 12.06.2023) Sd/- व म संह यादव (VIKRAM SINGH YADAV) लेखा सद%य / ACCOUNTANT MEMBER AG Date: 12.06.2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File 7.