SANJAY KUMAR SINGHAL,NEW DELHI V. INCOME TAX OFFICER WARD 26(1), DELHI

ITA 3581/DEL/2023

AI Insights

The case revolves around an appeal by Sanjay Kumar Singhal against the order of the Learned Commissioner of Income-Tax (Appeals)/National Faceless Appeal Centre, which upheld the addition of Rs. 15,47,000 as undisclosed income under Section 69A of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer (AO) following a scrutiny of cash deposits during the demonetization period. The appellant contested the jurisdiction of the AO who issued the notice under Section 143(2) of the Act, arguing that the notice was issued by an officer who did not have jurisdiction over his case. The Tribunal agreed with the appellant, noting that the assessment was conducted by a non-jurisdictional officer without the necessary transfer of jurisdiction as mandated by law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312917 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Other Referred Cases: Vedanta Resources Ltd vs ACIT, Louis Dreyfus Company Asia Pte Ltd vs CIT, Nirmal Gupta vs Pr CIT, ITO vs M/s NVS Builders P Ltd, Cosmat Traders P. Ltd., CIT vs. Lalitkumar Bardia, Kanwar Singh Saini vs Delhi High Court, Dev Milk Foods P Ltd. vs. Addl CIT, Sukhdham Infrastructures vs. ITO, Pr CIT Vs. Sukhdham Infrastructure LLP, Ajanta Industries Vs. Central Board of Direct Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: SURESH GUPTA
• Keywords: Opportunity of being heard
• Section: 143(3); 142(1)

Judgement Text

" INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 3581DEL/2023 Assessment Year: 2017-18 Sanjay Kumar Singhal, Room No. 207,Ranjeet Sadan, K-128, Mohammad Pur, Delhi PIN 1100 66 PAN No. AIAPS3801R Vs. ACIT, Circle-26(1), Delhi (Appellant) (Respondent) O R D E R PER VIMAL KUMAR, JUDICIAL MEMBER: The appeal filed by the appellant/assessee is against order dated 11.10.2023 of Learned Commissioner of Income-Tax (Appeals)/National Faceless Appeal Centre (NFAC) (hereafter referred to as “Ld. CIT(A)”) arising out of assessment order dated 20.12.2019 of the ITO, Ward 26(1), Delhi (hereinafter referred to as “the AO”) under Section 143(3) of the Income-Tax Act,1961 (hereinafter referred to as “the Act”) for the assessment year 2017-18. 2. Brief facts of case are that appellant/assessee filed income tax return for assessment year 2017-18 on 10.07.2017 declaring total income Rs.9,08,630/-. The return was processed under Section 143(1) of the Act and case taken up for Assessee by: Shri Suresh Gupta, CA Department by: Shri Sahil Kumar Bansal, Sr. DR Date of Hearing: 22.04.2025 Date of pronouncement: 30.04.2025 ITA No.3581/Del/2023 2 limited scrutiny for under CASS with reasons “large value of cash deposits during demonetization period as compared to returned income”. Subsequently, notice under Section 143(2) of the Act on 27.08.2018 was issued. Later on, the notice under Section 142(1) of the Act along with questionnaire were issued and served upon the assessee. As per information, assessee deposited cash of Rs.15,47,000/- in his bank account during demonetization period i.e. from 9th November, 2016 to 30th December, 2016. In response to the notices issued under Sections 143(2) and 142(1) of the Act, assessee submitted reply regarding source of cash deposits. Ld. AO vide order dated 20.12.2019 made addition of Rs.15,47,000/- . 3. Against order dated 20.12.2019, appellant/assessee preferred appeal before the Ld.CIT(A) which was dismissed vide order dated 11.10.2023. 4. Being aggrieved, appellant/assessee preferred present appeal with the following grounds: “1. The learned assessing officer has erred on facts and in law in making an addition of Rs.15,47,000/- on account of treating the cash deposit as undisclosed income under Section 69A of the Income Tax Act, 1961. 2. The learned assessing officer has erred in application of “Theory of Human Probability” in the said case keeping in view the explanation & supporting documents submitted by the assessee with respect to cash deposits. 3. The Ld. CIT(A) has erred in law in questioning the wisdom of the assessee in maintaining the cash balance as the same is not a ITA No.3581/Del/2023 3 subject matter of AO or CIT(A) and is best left to the prudence of the assessee. 4. The Ld. CIT(A) has erred in law in upholding the addition when the AO has failed to establish that the cash was used for other purpose anywhere else. 5. The Ld. CIT(A) has failed to acknowledge the fact that the trend of cash deposits is similar in period prior to demonetization and there is no unusual trend in cash deposits during the year under consideration as compare to preceding year. 6. The Ld. CIT(A) has erred in law in not considering the cash book submitted by the assessee when the assessee is maintaining accurate financial records. 7. The Ld. CIT(A) has erred in law and in facts in upholding the addition purely on the basis of assumptions and surmises without considering the facts of the case. 8. CIT(A) has erred in law in upholding the addition in the said case u/s 69A and section 115BBE of the Act as the said sections are not applicable in this case.” 5. At the time of hearing, Learned Authorized Representative for the appellant/assessee submitted that in additional ground no.1, assessee challenging the validity of the assessment proceedings u/s 143(3) of the Act on the ground that there was no valid issue of notice u/s 143(2) of the Act. The notice (PB 1&2) was issued u/s 143(2) of the Act on 27.08.2018 as mentioned in para 1 page 1 of the AO's Order. The above notice was issued by the AO Ward 33(1) Delhi, the authority having no jurisdiction over the appellant. The impugned assessment was completed by the AO Ward 26(1) Delhi, the authority having jurisdiction over the appellant. To support the above legal contention of the appellant, attention was invited to the Memo of resolution of ITA No.3581/Del/2023 4 the grievance dated 28.03.2025(enclosed herewith) provided by the Ld AO where the following extremely relevant facts for adjudication of the present ground of appeal were highlighted: - i. The jurisdiction of the appellant's case had been with the AO Ward 26(1) Delhi by virtue of the appellant being a director in a company namely M/S VMS India P Ltd and based on these facts the assessment was completed by the correct AO: ii. The AO Ward 33(1) Delhi, who issued notice u/s 143(2), never had jurisdiction over the appellant and the authority completing the assessment i.e. AO Ward 26(1) Delhi did not issue any notice u/s 143(2) of the Act; iii. The case of the appellant was transferred to AO Ward 26(1) Delhi from AO Ward 33(1) Delhi without any order u/s 127 passed by the Pr CIT which as per the above authority was required to be passed if the case is transferred to the jurisdiction outside Delhi. The appellant prays to draw your kind attention to copy of ITR (PB 17) where the jurisdiction of the appellant is mentioned as AO, Ward 26(1), Delhi and since, the notice u/s 143(2) has been issued based on same return, there was no reason for the AO Ward 33(1), Delhi to issue notice u/s 143(2) of IT Act ignoring the fact that jurisdiction of the case had been with different authority i.e. AO, Ward 26(1), Delhi. It is therefore a case where the assessment under appeal is outcome of a jurisdictional notice issued by a non-jurisdictional AO. In these circumstances, the assessment, resulting therefrom, needs be quashed in view of the following decisions: A. Vedanta Resources Ltd vs ACIT W.P.(C) No.6372 of 2022 (Orissa) B. Louis Dreyfus Company Asia Pte Ltd vs CIT W.P.(C) No.9713/2019 (Del) C. Nirmal Gupta vs Pr CIT ITA No.108/Del/2018 dt: 22.06.2021 D. ITO vs M/s NVS Builders P Ltd ITA No.3729/Del/2012 dt: 08.03.2018 ITA No.3581/Del/2023 5 E. Cosmat Traders P. Ltd. (2021) 128 taxmann.com 174(Kol) It is a settled law the assessment order has to be passed by the only authority having jurisdiction over an assessee. The Hon'ble Bombay High Court in the case of CIT vs. Lalitkumar Bardia (2017) 84 taxmann.com 213 (Bombay)) held that mere participation in proceedings or acquiescence would not confer jurisdiction upon the Assessing Officer who otherwise was not the Assessing Officer of the assessee. The Hon'ble Apex Court in the case of Kanwar Singh Saini vs Delhi High Court (2012) 4 SCC 307 (SC) has held that there can be no dispute regarding the settled legal proposition that conferment of jurisdiction is a legislative function and it can neither be conferred with the consent of the party nor by a superior court.” 6. Learned Authorized Representative for the appellant/assessee regarding additional ground no.2 submitted that the Ld. AO assumed jurisdiction without complying with the CBDT instructions is bad in law which proposition is laid in the following case; “Dev Milk Foods P Ltd. vs. Addl CIT ITA No,6767/Del/2019 dt:12.06.2020 reproduced/relied in the decision of Sukhdham Infrastructures vs. ITO ITA No.2611/Kol/2019 dt:23.02.2023 and the said decision has been approved by Hon’ble Calcutta High Court in Pr CIT Vs. Sukhdham Infrastructure LLP in IA No.GA/1/2023 dated 14.08.2023. “ 7. Learned Authorized Representative for the appellant/assessee regarding ground nos. 1 to 8 further submitted that regular ground nos. 1 to 8, on merits of addition of Rs. 15,47,000/- u/s 69A r.w.s. 115BBE of IT Act. From para 4 at page 4 of AO's order, it is evident that the appellant has deposited Rs. 15,47,000/- on 24.11.2016 during the demonetization period and besides above, the amounts of Rs.5 lakh was deposited on 12.08.2016, thus total cash deposited ITA No.3581/Del/2023 6 during the year has been Rs.20,47,000/-. The appellant gave explanation regarding the source of above cash deposit through replies dated 06.09.2018 (PB 3), 18.07.2019 (PB 26-27), 02.11.2019 (PB 58), 26.11.2019 (PB 94) and 06.12.2019 (PB 109-110). The appellant explained the source of cash deposit being sale of property at Rs.33,90,000/- on 30.01.2015 where entire sale consideration was received in cash. Copy of registered sale deed is placed in paper book at pages 118-170 where on page 169, the fact of entire sale consideration received in cash is duly noted. The Ld AO also does not dispute the receipt of sale consideration in cash which is evident from acceptance of the fact that the cash deposit of Rs.8,00,000/- on 01.10.2015(ΑΥ 2016-17) has not been disputed as sourced from the above sale consideration and also from the fact that the cash deposit Rs.5,00,000/- on 12.08.2016, also explained to be from the same source, has been accepted. But for no apparent reason, the Ld AO did not accept the same source for deposit of Rs.15,47,000/- made during demonetization. The cash summary for FY's 2014-15 to 2016-17 is separately filed vide submission dated 29.07.2024. 8. Learned Authorized Representative for the Revenue submitted that assessee did not challenge the jurisdiction of the Ld. AO during assessment proceedings. Therefore, as per sections 124(3)(a) and 292(B) of the Act, the appellant cannot raise ground regarding jurisdiction. ITA No.3581/Del/2023 7 9. From the examination of records in the light of aforesaid rival submissions, it is crystal clear that notice by non-jurisdictional ITO, Ward 33(1), Delhi was issued. The impugned order was completed by the Ld. AO, Ward 33(1), Delhi having jurisdiction without issuing any notice. ITRs for the assessment years 2015-16, 2016-17 and 2017-18 at page nos. 5, 12 and 17 of the paper books, jurisdiction of the appellant/assessee was with Ld. AO, Ward 26(1), Delhi. As such, assessment under appeal is the outcome of a jurisdictional notice issued by non-jurisdictional Ld. AO. Therefore, assessment needs to be quashed. Reliance can be placed on decision of following case laws: A. Vedanta Resources Ltd vs ACIT W.P.(C) No.6372 of 2022 (Orissa) B. Louis Dreyfus Company Asia Pte Ltd vs CIT W.P.(C) No.9713/2019 (Del) C. Nirmal Gupta vs Pr CIT ITA No.108/Del/2018 dt: 22.06.2021 D. ITO vs M/s NVS Builders P Ltd ITA No.3729/Del/2012 dt: 08.03.2018 E. Cosmat Traders P. Ltd. (2021) 128 taxmann.com 10. As per the ratio of judgment of Hon'ble Bombay High Court in the case of CIT vs. Lalitkumar Bardia (2017) 84 taxmann.com 213 (Bombay), it is well settled law the assessment order has to be passed by the only authority having jurisdiction over an assessee. It is held that mere participation in proceedings or acquiescence would not confer jurisdiction upon the Ld. AO who otherwise was not the Ld.AO of the assessee. ITA No.3581/Del/2023 8 11. Regarding validity of transfer of jurisdiction from one authority to another within the same State/City, as per section 127 of the Act, requires recording of reasons and affording a reasonable opportunity of being heard. Hon'ble Supreme Court of India in Ajanta Industries Vs. Central Board of Direct Tax (1976) 102 ITR 281 (SC) observed that requirement of recording of reasons under Section 127(1) of the Act is a mandatory direction under the Law. 12. As per the Ld. AO, appellant/assessee had deposited Rs.15,47,000/- on 24.11.2016 during demonetization period and an amount of Rs.5,00,000/- was deposited on 05.08.2016. Therefore, total cash deposited during the year was Rs.20,47,000/-. Appellant gave explanation through reply dated 06.09.2018 at page no.3, dated 18.07.2019 page no.58 , dated 26.11.2009 at page 94 and dated 06.12.2010 at page nos. 109 & 110 placed in paper books. The source cash deposit being sale of property at Rs.33,90,000/- on 30.01.2015 in cash. Copy of Registered Sale Deed is available at page nos. 118 and 170 of the paper books. Ld. AO did not dispute receipt of sales consideration in cash as is evident from the acceptance of fact that cash deposit of Rs.8,00,000/- on 01.10.2015 was not deposited and the cash of Rs.5,00,000/- on 12.08.2016 from the source was accepted. Ld. AO had no apparent reason for not accepting same source of deposit of Rs.15,47,000/- made during the demonetization. ITA No.3581/Del/2023 9 13. In view of the above material facts, the addition of Rs.15,47,000/- is unsustainable. The additional ground of appeal nos. 1 and 2 as well as grounds of appeal nos. 1 to 8 are allowed. 14. In the result, the appeal of the appellant/assessee is allowed. Order pronounced in the open court on 30/04/2025. Sd/- Sd/- (PRADIP KUMAR KEDIA) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30/04/2025 Mohan Lal Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "