Dharmendra Singh Chauhan, Gurgaon V. ITO, Ward-1(4), Gurgaon

ITA 5065/DEL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0493 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 20-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Additional evidence; Question of law; Tangible material; Procedural lapse; Block assessment; Set aside
• Section: 143(3); 292BB; 143(2); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO.5065/DEL/2018 ASSESSMENT YEAR: 2010-11 SHRI DHARMENDRA SINGH CHAUHAN, C/O- CSD AND CO. LLP, 223- 224, VIPUL TRADE CENTRE, SOHNA ROAD, SECTOR-48, GURGAON, HARYANA VS. ITO, WARD-1(4), GURGAON PAN :AFWPC5655C (APPELLANT) (RESPONDENT) ORDER PER H.S. SIDHU, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 28.03.2018 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, GURGAON, RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LD. COMMISSIONER OF INCOME TAX (APPEALS) [HERE IN AFTER REFERRED TO AS 'LD. CIT(A)'] ERRED IN UPHOLDING THE RE-ASSES SMENT UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 AS CARRIED BY ID. ASSESSING OFFICER (HEREIN AFTER REFERRED TO AS 'LD. A.O'.), W HICH IS AGAINST THE PROVISIONS OF THE ACT. APPELLANT BY SHRI SURESH CHAWLA, CA MS. POOJA, CA RESPONDENT BY SHRI PRADEEP SINGH GAUTAM, SR.DR DATE OF HEARING 17.12.2019 DATE OF PRONOUNCEMENT 26.12.2019 2 ITA NO.5065/DEL/2018 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF TH E LD. A.O. IN FRAMING ASSESSMENT WITHOUT ISSUING THE STATUTORY NO TICE UNDER SECTION 143(2) OF THE ACT. 2.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DEFECT OF NON-ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT GOES TO THE ROOT OF THE MATTER AND SUCH JURISDICTIO NAL DEFECT CANNOT BE CURED BY SECTION 292BB OR OTHERWISE. 3.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, LD. CIT(A) ERRED IN UPHOLDING ACTION OF THE LD . A.O., FOR REOPENING ASSESSMENT PROCEEDINGS MERELY ON THE BASI S OF INFORMATION RECEIVED FROM THE INVESTIGATION WING, A HMEDABAD AND WITHOUT ANY TANGIBLE MATERIAL. 3.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, LD. CIT(A) ERRED IN UPHOLDING THE ADDITION MAD E OF RS. 16,61,557/- UNDER THE HEAD 'CAPITAL GAIN' ON ACCOUN T OF CLIENT CODE MODIFICATION BY THE SHARE BROKER IN SALE / PURCHASE TRANSACTION OF SECURITIES SOLELY BASED ON INFORMATION RECEIVED FRO M INVESTIGATION WING, WITHOUT APPLICATION OF MIND AND WITHOUT MAKIN G ANY FURTHER ENQUIRIES. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LD. CIT(A) ERRED IN PASSING ORDER ON THE BASIS OF REMAND REPORT WHICH WAS CALL FOR ON THE ISSUE OF PRODUCTIO N OF ADDITIONAL EVIDENCE BEFORE APPELLATE AUTHORITY AS PER RULE 46A OF THE INCOME TAX RULES. HOWEVER, IN THE GIVEN CASE, THERE IS NO MATTER / ISSUE ABOUT PRODUCTION OF ADDITIONAL EVIDENCE BEFORE LD. CIT(A) RATHER IT WAS ABOUT RAISING OF ADDITIONAL GROUND BEFORE LD. C IT(A). 4.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ORDER PASSED BELOW AUTHORITIES ARE WITHOUT APPLICATION OF MIND AND MERELY ON THE BASIS OF REMAND REPORT ON TH E ISSUE, NOT RELATED TO APPELLATE PROCEEDINGS. 4.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, LD. CIT(A) ERRED IN MENTIONING IN HER ORDER TH AT DURING THE APPEAL PROCEEDINGS NO FURTHER SUBMISSION ON MERIT W AS MADE BY THE APPELLANT AS AGAINST THE SUBMISSIONS WERE MADE BY T HE APPELLANT ON FACTS AND ALSO DISCUSSED THE SAME DURING THE APP ELLATE PROCEEDINGS. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR VARY ANY OF THE GROUND EITHER AT OR BEFORE THE HEARING O F THE APPEAL. 3 ITA NO.5065/DEL/2018 2. AT THE HEARING, LEARNED COUNSEL FOR THE ASSESSEE S TATED THAT THE SIMILAR ISSUE REGARDING NON-ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT) HAS ALREADY BEEN ADJUDICATED AND DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. LAXMAN DA S KHANDELWAL, IN CIVIL APPEAL NOS.6261-6262 OF 2016, VIDE ORDER DATED AUGUST 13, 2019. 3. IN SUPPORT OF HIS ARGUMENTS HE HAS ALSO FILED A CO PY OF JUDGMENT PASSED BY HONBLE SUPREME COURT IN THE CAS E OF COMMISSIONER OF INCOME TAX VS. LAXMAN DAS KHANDELWA L (SUPRA). HE DRAWN MY ATTENTION TOWARDS PARAS 5 TO 1 1 OF THE ORDER OF HONBLE SUPREME COURT, WHICH READ AS UNDER: 5. AT THE OUTSET, IT MUST BE STATED THAT OUT OF TW O QUESTIONS OF LAW THAT AROSE FOR CONSIDERATION IN HOTEL BLUE MOONS C ASE2 THE FIRST QUESTION WAS WHETHER NOTICE UNDER SECTION 143(2) WO ULD BE MANDATORY FOR THE PURPOSE OF MAKING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. IT WAS OBSERVED :- 3. THE APPELLATE TRIBUNAL HELD, WHILE AFFIRMING TH E DECISION OF CIT (A) THAT NON-ISSUE OF NOTICE UNDER SECTION 143( 2) IS ONLY A PROCEDURAL IRREGULARITY AND THE SAME IS CURABLE. IN THE APPEAL FILED BY THE ASSESSEE BEFORE THE GAUHATI HIGH COURT , THE FOLLOWING TWO QUESTIONS OF LAW WERE RAISED FOR CONS IDERATION AND DECISION OF THE HIGH COURT, THEY WERE: (1) WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE ISSUANCE OF NOTICE UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 WITHIN THE PRESCRIBED TIMELIMI T FOR THE PURPOSE OF MAKING THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 IS MANDATORY? AN D (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE UNDISPUTED FINDINGS ARRIVED AT 4 ITA NO.5065/DEL/2018 BY THE COMMISSIONER OF INCOME TAX (APPEALS), THE ADDITIONS MADE UNDER SECTION 68 OF THE INCOME TAX A CT, 1961 SHOULD BE DELETED OR SET ASIDE? 4. THE HIGH COURT, DISAGREEING WITH THE TRIBUNAL, H ELD, THAT THE PROVISIONS OF SECTION 142 AND SUBSECTIONS (2) A ND (3) OF SECTION 143 WILL HAVE MANDATORY APPLICATION IN A CA SE WHERE THE ASSESSING OFFICER IN REPUDIATION OF RETURN FILE D IN RESPONSE TO A NOTICE ISSUED UNDER SECTION 158-BC(A) PROCEEDS TO MAKE AN INQUIRY. ACCORDINGLY, THE HIGH COURT ANSWERED TH E QUESTION OF LAW FRAMED IN AFFIRMATIVE AND IN FAVOUR OF THE A PPELLANT AND AGAINST THE REVENUE. THE REVENUE THEREAFTER APP LIED TO THIS COURT FOR SPECIAL LEAVE UNDER ARTICLE 136, AND THE SAME WAS GRANTED, AND HENCE THIS APPEAL. . . 13. THE ONLY QUESTION THAT ARISES FOR OUR CONSIDERA TION IN THIS BATCH OF APPEALS IS: WHETHER SERVICE OF NOTICE ON T HE ASSESSEE UNDER SECTION 143(2) WITHIN THE PRESCRIBED PERIOD O F TIME IS A PREREQUISITE FOR FRAMING THE BLOCK ASSESSMENT UNDER CHAPTER XIV-B OF THE INCOME TAX ACT, 1961? . . .. 27. 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 FOR THE PURPOSE OF BLOCK ASSESSMENTS. WE DO NOT AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL F OR THE REVENUE, SINCE WE DO NOT SEE ANY REASON TO RESTRICT THE SCOPE AND MEANING OF THE EXPRESSION SO FAR AS MAY BE, AP PLY. IN OUR VIEW, WHERE THE ASSESSING OFFICER IN REPUDIATIO N OF THE RETURN FILED UNDER SECTION 158- BC(O) PROCEEDS TO M AKE AN ENQUIRY, HE HAS NECESSARILY TO FOLLOW THE PROVISION S OF SECTION 142, SUB-SECTIONS (2) AND (3) OF SECTION 143. 6. THE QUESTION, HOWEVER, REMAINS WHETHER SECTION 2 92BB, WHICH CAME INTO EFFECT ON AND FROM 01.04.2008 HAS EFFECTE D ANY CHANGE. SAID SECTION 292BB IS TO THE FOLLOWING EFFECT:- 292BB. NOTICE DEEMED TO BE VALID IN CERTAIN CIRCUMSTANCES . - WHERE AN ASSESSEE HAS APPEARED IN ANY PROCEEDING OR COOPERATED IN ANY INQUIRY RELATING TO AN ASSESSMENT OR REASSESSMENT, IT SHALL BE DEEMED THAT ANY NOTICE UNDER ANY PROVISION OF THIS ACT, WHICH IS RE QUIRED TO BE SERVED UPON HIM, HAS BEEN DULY SERVED UPON HIM IN T IME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND SUCH ASSESSEE SHALL BE PRECLUDED FROM TAKING ANY OBJECTION IN ANY PROCEEDING OR INQUIRY UNDER THIS ACT THAT THE NOTIC E WAS 5 ITA NO.5065/DEL/2018 (A) NOT SERVED UPON HIM; OR (B) NOT SERVED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPROPER MANNER: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY WHERE THE ASSESSEE HAS RAISED SUCH OBJECTION BEFORE THE COMPLETION OF SUCH ASSESSMENT OR REASSESSMENT. 7. A CLOSER LOOK AT SECTION 292 BB SHOWS THAT IF T HE ASSESSEE HAS PARTICIPATED IN THE PROCEEDINGS IT SHALL BE DEE MED THAT ANY NOTICE WHICH IS REQUIRED TO BE SERVED UPON WAS DULY SERVED AND THE ASSESSEE WOULD BE PRECLUDED FROM TAKING ANY OBJECTI ONS THAT THE NOTICE WAS (A) NOT SERVED UPON HIM; OR (B) NOT SERV ED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPROPER MANNER. ACCORDING TO MR. MAHABIR SINGH, LEARNED SENIOR ADVOCATE, SINCE THE R ESPONDENT HAD PARTICIPATED IN THE PROCEEDINGS, THE PROVISIONS OF SECTION 292BB WOULD BE A COMPLETE ANSWER. ON THE OTHER HAND, MR. ANKIT VIJAYWARGIA, LEARNED ADVOCATE, APPEARING FOR THE RESPONDENT SUBMITTED THAT THE NOT ICE UNDER SECTION 143(2) OF THE ACT WAS NEVER ISSUED WHICH WA S EVIDENT FROM THE ORDERS PASSED ON RECORD AS WELL AS THE STAND TA KEN BY THE APPELLANT IN THE MEMO OF APPEAL. IT WAS FURTHER SUB MITTED THAT ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT BEING PREREQUISITE, IN THE ABSENCE OF SUCH NOTICE, THE ENTIRE PROCEEDIN GS WOULD BE INVALID. 8. THE LAW ON THE POINT AS REGARDS APPLICABILITY OF THE REQUIREMENT OF NOTICE UNDER SECTION 143(2) OF THE A CT IS QUITE CLEAR FROM THE DECISION IN BLUE MOON'S CASE. THE ISSUE TH AT HOWEVER NEEDS TO BE CONSIDERED IS THE IMPACT OF SECTION 292BB OF THE ACT. 9. ACCORDING TO SECTION 292BB OF THE ACT, IF THE ASSESSEE HAD PARTICIPATED IN THE PROCEEDINGS, BY WAY OF LEGAL FI CTION, NOTICE WOULD BE DEEMED TO BE VALID EVEN IF THERE BE INFRACTIONS AS DETAILED IN SAID SECTION. THE SCOPE OF THE PROVISION IS TO MAKE SERV ICE OF NOTICE HAVING CERTAIN INFIRMITIES TO BE PROPER AND VALID I F THERE WAS REQUISITE PARTICIPATION ON PART OF THE ASSESSEE. IT IS, HOWEVER, TO BE NOTED THAT THE SECTION DOES NOT SAVE COMPLETE ABSEN CE OF NOTICE. FOR SECTION 292BB TO APPLY, THE NOTICE MUST HAVE EMANAT ED FROM THE DEPARTMENT. IT IS ONLY THE INFIRMITIES IN THE MANNE R OF SERVICE OF NOTICE THAT THE SECTION SEEKS TO CURE. THE SECTION IS NOT INTENDED TO CURE COMPLETE ABSENCE OF NOTICE ITSELF. 10. SINCE THE FACTS ON RECORD ARE CLEAR THAT NO N OTICE UNDER SECTION 1743(2) OF THE ACT WAS EVER ISSUED BY THE DEPARTMEN T, THE FINDINGS RENDERED BY THE HIGH COURT AND THE TRIBUNAL AND THE CONCLUSION 6 ITA NO.5065/DEL/2018 ARRIVED AT WERE CORRECT. WE, THEREFORE, SEE NO REAS ON TO TAKE A DIFFERENT VIEW IN THE MATTER. 11. THESE APPEALS ARE, THEREFORE, DISMISSED. NO COS TS. 4. HE REQUESTED THAT RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE SUPREME COURT THE ADDITION IN DISPUTE MAY B E DELETED. 5. LEARNED DR RELIED ON THE ORDER PASSED BY THE LEARN ED FIRST APPELLATE AUTHORITY. 6. I HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RELEVANT RECORDS, ESPECIALLY ORDERS PASSED BY THE REVENUE AU THORITIES ALONG WITH THE JUDGMENT PASSED BY THE HONBLE SUPRE ME COURT. I HAVE ALSO PERUSED THE ORDER SHEET OF THE ASSESSING OFFICER AND I AM OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT I SSUED NOTICE UNDER SECTION 143(2) OF THE ACT. WE ARE OF THE CONS IDERED VIEW THAT THE ISSUE IN DISPUTED IS SQUARELY BEEN COVERED BY THE JUDGMENT OF HONBLE SURPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. LAXMAN DAS KHANDELWA L (SUPRA), 7. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE ISSUE IN DISPUTE REGARDING NON-ISSUANC E OF NOTICE UNDER SECTION 143(2) OF THE ACT, THE ISSUE WHICH HA S ALREADY BEEN ADJUDICATED IN FAVOUR OF THE ASSESSEE IN THE CASE O F COMMISSIONER 7 ITA NO.5065/DEL/2018 OF INCOME TAX VS. LAXMAN DAS KHANDELWAL (SUPRA), TH E ADDITIONS IN DISPUTE DESERVES TO BE DELETED. 8. ACCORDINGLY, RESPECTFULLY FOLLOWING THE JUDGMENT PA SSED BY THE HONBLE SUPREME COURT IN THE CASE OF COMMISSION ER OF INCOME TAX VS. LAXMAN DAS KHANDELWAL (SUPRA), THE A DDITION IN DISPUTE IS DELETED AND THE APPEAL FILED BY THE ASSE SSEE IS PARTLY ALLOWED. NO OTHER POINTS HAVE BEEN ARGUED BY THE LE ARNED COUNSEL FOR THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 26 TH DECEMBER, 2019. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED: 26 TH DECEMBER, 2019. RK/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI