NARENDRA KHIMJI SAVLA,MUMBAI V. INCOME TAX OFFICER WARD 6(1)(1), MUMBAI

ITA 6567/MUM/2024

AI Insights

The case involves Narendra Khimji Savla, the appellant, contesting the reassessment proceedings initiated by the Income Tax Officer (ITO) under section 147 of the Income Tax Act, 1961, for the Assessment Year 2012-13. The ITO had reopened the assessment based on information regarding a loan of Rs. 16,00,000 borrowed by the assessee, which was linked to a company involved in providing accommodation entries for unaccounted cash. The assessee challenged the reassessment and the subsequent additions made under sections 69A and 69C of the Act, arguing procedural lapses and incorrect application of the law. The Commissioner of Income Tax (Appeals) upheld the ITO's actions, leading to the appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314577 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: Hotel Blue Moon vs. Income Tax Officer, PCIT vs. Shree Jay Shivshakar Pvt. Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: HIMANSHU GANDHI; ISSUE OF NOTICE UNDER SECTION
• Keywords: Set aside; Reassessment proceedings; Unexplained expenditure; Search and seizure; Accommodation entries; Bogus loan; Procedural lapse; Bogus
• Section: 147; 148; 144; 142(1); 132; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VP & MS PADMAVATHY S, AM I.T.A. No. 6567/Mum/2024 (Assessment Year: 2012-13) Narendra Khimji Savla, 34, Uma Building, Opp. Kirti College, Kashinath Dhuru Road, Dadar, Mumbai-400028. PAN: AHEPS9345P Vs. ITO, Ward-6(1)(1), Aayakar Bhavan, M.K. Road, Churchgate, Mumbai-400020. Appellant) : Respondent) Appellant /Assessee by : Shri Himanshu Gandhi, AR Revenue / Respondent by : Shri Leyaqat Ali Aafaqui- Sr. DR Date of Hearing : 24.04.2025 Date of Pronouncement : 06.05.2025 O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] dated 13.11.2024 for AY 2012-13. The assessee raised the following grounds of appeal: 2 ITA No. 6567/Mum/2024 Narendra Khimji Savla “1. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the action of Ld AO of initiating reassessment proceeding under section 147 of Income Tax Act, 1961. 2. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the action of Ld AO of passing assessment order without issuing notice u/s 143(2) of the Income Tax Act, 1961. 3. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the action of Ld AO that reassessment order cannot be passed without providing reasons recorded for reopening. 4. On the facts and circumstances of the case and law, the Ld CIT(A) erred in not adjudicating the issue where the Ld AO has made addition of Rs. 16,00,000/- as unexplained Money u/s 69A of Income Tax Act, 1961 on account of borrowing cash loan without providing any material which was relied by the Ld AO and even failed to consider that provisions of sections 69A is not applicable when no books of accounts are maintained. 5. Without Prejudice to Ground No 4, on the facts and circumstances of the case and law, the Ld CIT(A) erred in not 5 adjudicating the issue where the Ld AO failed to consider that borrowing of loan does not fall in the definition of Income and thus it cannot be added to the total income of the appellant 6. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in not adjudicating the issue where the Ld AO has passed an assessment order on PAN No DQGPS6936E (for which the appellant has already filed an application for cancellation) as against the PAN No AHEPS9345P which is regularly used by the appellant. 7. On the facts and circumstances of the case and law, the Ld CIT(A) erred in confirming the action of Ld AO of estimating interest of Rs. 1,92,000/- as unexplained expenditure u/s 69C of R the Income Tax Act being 1% per month on the value of loan amount of Rs. 16,00,000/- 8. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming the action of Ld AO of initiating penalty provision under section 271(1)(c).” 2. The assessee is an individual. The Assessing Officer (AO) received information from DDIT (Inv.) in respect of the assessee regarding a loan borrowed 3 ITA No. 6567/Mum/2024 Narendra Khimji Savla by the assessee from M/s Evergreen Enterprises to the tune of Rs. 16,00,000/-. A search and seizure operation under section 132 of the Income Tax Act, 1961 (the Act) was carried out in the case of M/s Evergreen Enterprises during which time it was found that M/s Evergreen Enterprises is involved in providing accommodation entries for unaccounted cash. The AO accordingly issued a notice under section 148 of the Act reopening the assessment. The AO issued notices calling for details from the assessee in the regard. The assessee in response to notice under section 148 filed a letter saying that the PAN i.e. DQGPS6936E under which the AO has issued the notice have been surrendered by the assessee and a cancellation request has already been filed. The assessee further submitted that the actual PAN of the assessee is AHEPS9345P and that the assessee has been regularly filing the return under the said PAN. The assessee also submitted that the return filed under the PAN. AHEPS9345P may be treated as the return filed in response to notice under section 148 of the Act. The assessee in this regard submitted the copies of the letter filed requesting for cancellation of the PAN before the AO. The AO held that the request for cancellation of PAN cannot be entertained during the pendency of the assessment proceeding and therefore called on the assessee to furnish the details pertaining to the loan. Since the assessee did not furnish any further details the AO completed the assessment under section 144 r.w.s. 147 of the Act wherein the made an addition of Rs. 16,00,000/- under section 69A of the Act and addition of Rs. 1,92,000/- towards interest under section 69C of the Act. Aggrieved the assessee filed further appeal before the CIT(A). Before the CIT(A) the assessee submitted that AO erred in initiating the reassessment proceeding under section 148 without issuing notice under section 143(2) of the Act. The assessee also raised grounds on merit. The CIT(A) dismissed the appeal on the legal contention of section 143(2) of the Act notice not being issued. On merits, the CIT(A) set aside the issue back to the 4 ITA No. 6567/Mum/2024 Narendra Khimji Savla AO for consideration on merits. The assessee is in appeal before the Tribunal against the order of the CIT(A). 3. The ld. AR submitted that the assessee has been regularly filing return under the PAN: AHEPS9345P. The ld. AR further submitted that the assessee came to know that another PAN: DQGPS6936E is existing in his name subsequently and the assessee immediately filed an application for cancellation on 14.12.2017. The ld. AR also submitted that the cancellation request has still not been processed by the revenue. The ld. AR argued that in response to notice under section 148 of the Act the assessee has filed a reply stating that the original return filed under PAN: AHEPS9345P may be treated as return in response to notice under section 148 of the Act which has not been considered by the AO. The ld. AR further argued that issue of notice under section 143(2) is mandatory and the proceedings done by the AO without issuing a notice under section 143(2) is null and void. The ld. AR relied on the decision of the Co-ordinate Bench in assessee's own case for AY 2011-12 (ITA No. 6566/Mum/2024 dated 20.02.2025). On merits the ld. AR submitted that the AO has made the addition towards alleged bogus loan merely based on the report of the Investigation Wing without conducting any independent enquiry. The ld. AR further submitted that the impugned loan has been repaid by the assessee and that it is a settled legal position that when the loans subsequently repaid than no addition can be done under section 69A of the Act. 4. The ld. DR on the other hand submitted that the AO has correctly held that the PAN cannot be cancelled during the pendency of assessment proceedings. The ld. DR further submitted that the assessee has not discharged the onus of proving the genuineness of the loans and therefore the AO has correctly added the loan as unexplained under section 69A of the Act. 5 ITA No. 6567/Mum/2024 Narendra Khimji Savla 5. We heard the parties and perused the material on record. We notice that the AO has reopened the assessment of the assessee by issue of notice under section 148 of the Act under the PAN: DQGPS6936E. We further notice that the assessee in response to the notice under section 148 has filed a reply the extract of which is given below: 6 ITA No. 6567/Mum/2024 Narendra Khimji Savla 6. From the perusal of the above letter, we notice that the assessee has made a request for treating the original return as return filed in response to notice under section 148 of the Act. However, it is noticed that the AO has completely ignored the said request of the assessee and proceeded to issue a notice under section 142(1) of the Act. In this regard we notice that a similar issue arose in assessee's own case for AY 2011-12 where the Co-ordinate Bench has held that “5. Admittedly the Ld. AO has processed based on the income declared under PAN No. AHEPS9345P filed on 23.11.2011. The said PAN was under the jurisdiction of ITO 6(1)(1) Mumbai. The assessee responded to notice u/s. 148 of the Act on 20.05.2018, wherein it is categorically mentioned that, the return filed in the PAN No. AHEPS9345P is under the jurisdiction of ward 6(1)(1), and the said may be treated as return in lieu of notice u/s. 148 of the Act. The said letter was filed with the ward 21(2)(4) who issued notice u/s. 148 bearing PAN No. DQGPS6936E. 5.1 The assessee filed letter dated 14.12.2017 placed at page no. 3 of the paper book dated 31.01.2025. The assessee had applied for cancelation of PAN No. DQGPS6936E, the said letter was filed with the Income Tax Office of 6(1)(1). All these facts were within the knowledge of the Ld. AO as is clear from the assessment order. The assessee placed screen shot of the income tax portal at page no. 1 of the paperbook filed on the date of hearing which categorically reveals that notice u/s. 143(2) was not issued to the assessee against the return of income that was considered for computing income in the hands of the assessee. 5.2 It is also noted that, issuance of notice u/s. 143(2) of the act, is qualitatively different from the issue of notice u/s. 142(1) of the act, which is in a standard proforma. In the present facts of the case the notice u/s. 143(2) was not issued to the assessee, based on examining the return of income filed by assessee that was picked up for scrutiny in the reassessment proceedings. Thus, based on various judicial pronouncements on this aspect, and the legal position being evidently clear that, the reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by Ld.AO u/s. 143(2) of the act, pursuant to filing of return of income. Hon’ble Supreme Court in case of Hotel 7 ITA No. 6567/Mum/2024 Narendra Khimji Savla Blue Moon reported in (2010) 188 taxmann.com 133 has held that non issuance of notice u/s. 143(2) of the act after filing of return of income cannot be said to be mere procedural irregularity and the same is not curable u/s. 292BB of the Act. 5.3 The basic requirement under the act for issuance of notice u/s. 143(2) cannot be dispensed as also held by with Hon’ble Delhi High Court in case of PCIT vs. Shree Jay Shivshakar Pvt. Ltd reported in (2015) 64 taxmann.com 220 on identical set of facts. In present facts non issue notices u/s. 143(2), subsequent to the letter filed by the assessee dated 20/05/2018 intimating the Ld.AO to treat original return as return pursuant to the notice u/s. 148 of the act would be fatal to reassessment order so passed more so when the Ld.AO considered the same ROI for computing taxable income in the hands of the assessee. 5.3 Respectfully following above discussion and decision referred to, we are of the opinion that, the reassessment orders passed for the years under consideration deserves to be quashed in the present facts of the case as no notice u/s. 143(2) was issued for both years under consideration to the assessee post response filed by the assessee to treat its original return in response to the notice u/s. 148 of the act. 5.4 As the legal issue raised by the assessee stands allowed, in consequences, the reassessment order passed for year under consideration stands quashed. I therefore do not find any reason to discuss the issues on merits of the addition as they become academic.” 7. For the year under consideration also the AO has ignored the letter filed by the assessee to treat the return filed under PAN AHEPS9345P as return filed in response to notice under section 148 of the Act. We further notice that the CIT(A) has also recorded that the assessee has not filed the return of income without considering the submissions of the assessee. These facts being identical in our considered view the decision of the coordinate bench in assessee's own case above is applicable for the year under consideration also. Accordingly respectfully 8 ITA No. 6567/Mum/2024 Narendra Khimji Savla following the above decision we hold that the assessment completed without issue of notice under section 143(2) is not sustainable. 8. In result, appeal of the assessee is allowed. Order pronounced in the open court on 06-05-2025. Sd/- Sd/- (SAKTIJIT DEY) (PADMAVATHY S) Vice-President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "