SARBJIT SHARMA,DELHI V. ITO,WARD-61(3), DELHI

ITA 5568/DEL/2024

AI Insights

The case involves Sarbjit Sharma, the appellant, contesting an assessment order for the assessment year 2017-18 passed by the Income Tax Officer (ITO), Ward 61(3), Delhi, which was upheld by the Commissioner of Income Tax (Appeals) - NFAC, Delhi. The primary contention was the validity of the notice issued under section 143(2) of the Income Tax Act, 1961, which was claimed to be in violation of the mandatory revised formats prescribed by the CBDT. The Tribunal admitted an additional ground of appeal regarding the invalidity of the notice and, after considering various precedents and the mandatory nature of CBDT instructions, quashed the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772461 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: National Thermal Power Company Ltd. vs. CIT, UCO Bank vs. CIT, Back Office IT Solution Pvt. Ltd. vs. Union of India, Anita Garg vs. ITO, Ankur Dealcom (P) Ltd. vs. PCIT, Hind Ceramics Pvt. Ltd. vs. DCIT, Tapas Kumar Das v. ITO, Sajal Biswas v. I.T.O, M/s DURGA AUTOMOTIVES PVT. LTD. VS. DCIT, SHIB NATH GHOSH VS. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: VED JAIN; UMA UPADHYAY
• Keywords: Opportunity of being heard; Invalid notice; Bad and doubtful debts; Gift; Principle of natural justice
• Section: 143(3)

Judgement Text

"ITA No.5568/Del/2024 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI M BALAGANESH, ACCOUNTANT MEMBER आ.अ.सं/.I.T.A No.5568/Del/2024 िनधा रणवष /Assessment Year: 2017-18 SARBJIT SHARMA 36, GF, Paschimi Marg, Vasant Vihar, Vasant Vihar-1, South West Delhi. PAN No.AABPS4256R बनाम Vs. ITO, Ward 61(3), Delhi. अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent Assessee by Shri Ved Jain, Adv. & Ms. Uma Upadhyay, CA Revenue by Shri Manish Gupta, Sr. DR सुनवाईक\bतारीख/ Date of hearing: 19.08.2025 उ\u000eोषणाक\bतारीख/Pronouncement on 27.08.2025 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi dated 22.11.2024 for the AY 2017-18. The assessee in her appeal raised the following grounds: Printed from counselvise.com ITA No.5568/Del/2024 2 1. “On the facts and circumstances of the case, the order passed by the Ld. CIT(Appeals), Income Tax Department, National Faceless Appeal Centre [CIT(A), ITD, NFAC] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the Ld. CIT(A), ITD has erred both on facts and in law in passing the order ex parte without providing the assessee reasonable opportunity of being heard violating the principle of natural justice. 3. On the facts and circumstances of the case, the order passed by the Ld. CIT(A), ITD is bad in the eyes of law and on facts as the same has been passed without giving any finding on the merits of the case. 4. On the facts and circumstances of the case, the Ld. CIT(A), ITD has erred both on facts and in law in confirming the action of the AO despite the fact that the order passed by him u/s 143(3) of the Income Tax Act is barred by limitation since the same is passed beyond the specified time limit. 5. On the facts and circumstances of the case, the Ld.CIT(A), ITD has erred both on facts and in law in confirming the addition of Rs.15,00,000/- on account of cash deposit invoking the provisions of section 69A of the Act. 6. On the facts and circumstances of the case, the Ld. CIT(A), ITD has erred both on facts and in law in confirming the addition of Rs.5,00,000/- on account of cash advance received for legal expenses invoking the provisions of section 69A of the Act. 7. On the facts and circumstances of the case, the Ld. CIT(A), ITD has erred both on facts and in law in confirming the addition of Rs.36,00,000/- on account of cash advance received for legal expenses invoking the provisions of section 69A of the Act. Printed from counselvise.com ITA No.5568/Del/2024 3 8. On the facts and circumstances of the case, the Ld.CIT(A), ITD has erred both on facts and in law in confirming the addition of Rs.38,80,000/- on account of amount received from Kirti Sharma and Travel Leaf India invoking the provisions of section 69A of the Act. 9. On the facts and circumstances of the case, the Ld. CIT(A), ITD has erred both on facts and in law in confirming the addition of Rs.20,00,000/- on account of gift received from Mother u/s 69A of the Income Tax Act. 10. On the facts and circumstances of the case, the Ld. CIT(A), ITD has grossly erred both on facts and in law in confirming the above said additions by invoking the provisions of section 69A which is not applicable to the facts of the case of the assessee. 11. On the facts and circumstances of the case, the Ld. CIT(A), ITD has grossly erred both on facts and in law in confirming the above said additions despite the fact that the same has been made by the AO by indulging in surmises without brining on any direct evidence against the assessee, only on the basis of presumption and assumption. 12. That the appellant craves leave to add, amend or alter any of the grounds of appeal.” 2. The Assessee also filed application for admission of additional grounds stating as under: “1. The applicant has filed the above said appeal No. 5568/Del/2024 on 2nd December, 2024 against the order dated 22.11.2024 passed by the learned CIT(Appeals), Income Tax Department, National Faceless Appeal Centre, New Delhi under Section 250 of the Income Tax Act. Printed from counselvise.com ITA No.5568/Del/2024 4 2. That while filing the appeal, the applicant has raised 12 grounds of appeal. 3. However, while filing the appeal the appellant inadvertently has left out the ground of appeal relating to order passed by Ld. AO being null and void. 4. That accordingly, the applicant is filing additional ground of appeal. 5. That it is submitted that the following additional ground may kindly be taken as the same goes to the root of the issue and all the facts are already on record: 13. “On the facts and circumstances of the case, the notice issued by the AO u/s 143(2) of the Act and the consequent assessment are invalid, illegal, non-est and liable to be quashed since the notice u/s 143(2) has been issued without following the procedure prescribed under CBDT Instruction F. No. 225/157/2017/ITA-II dated 23.06.2017.\" 6. That the ground revised in this application is legal ground going to the root of the matter, and all the facts relating to the same are already part of record. 7. That in the circumstances, it is prayed that the additional grounds may be taken on record.” 3. Ld. Counsel for the assessee, at the outset, submits that additional ground of appeal filed by the assessee is a legal ground going to the root of the very validity of framing the assessment and therefore the same may be admitted for adjudication. Reliance was placed on the decision of the Hon’ble Printed from counselvise.com ITA No.5568/Del/2024 5 Supreme Court in the case of National Thermal Power Company Ltd. vs. CIT (229 ITR 383). 4. Heard rival submissions. The additional ground raised by the assessee since going to the root of the very validity of the assessment made based on the notice issued u/s 143(2) the same is admitted for adjudication. 5. Ld. Counsel for the assessee submitted that the notice issued u/s 143(2) by the Assessing Officer on 21.08.2018 is void ab initio having been issued in violation of the binding CBDT Instruction No. F.No.225/157/2017/ITA-II dated 23.06.2017. Ld. Counsel submits that the CBDT u/s 119 of the Act issued the above instructions prescribing mandatory revised formats for all scrutiny notices issued u/s 143(2) of the Act. He submitted that these instructions are binding on all the Income tax authorities and placed reliance on the decision of the Hon’ble Supreme Court in the case of UCO Bank vs. CIT (237 ITR 889) and Back Office IT Solution Pvt. Ltd. vs. Union of India (2021) SCC OnLine (Del) 2741. Ld. Counsel for the assessee referring to para 3 of the above instructions of CBDT submitted that the Board has directed that all scrutiny notices u/s 143(2) of the Act shall henceforth be issued in the revised formats only. The Ld. Printed from counselvise.com ITA No.5568/Del/2024 6 Counsel for the assessee submits that in the present case the Assessing Officer did not issue the notice in the prescribed revised format and this is a direct violation of the CBDT’s binding instructions. Ld. Counsel placed reliance on the following decisions: 1. “Anita Garg vs. ITO, ITA No.4053/Del/2024 dated 30.07.2025; 2. Ankur Dealcom (P) Ltd. vs. PCIT, ITA No.197/Kol/2025 dated 18.07.2025; 3. Hind Ceramics Pvt. Ltd. vs. DCIT, Circle - 10(1) [ITA Nos. 608 & 610/KOL/2024] dated 06.05.2025; 4. Tapas Kumar Das v. ITO, Ward-50(5), Kolkata [ITA No. 1660/KOL/2024] dated 11.03.2025; 5. Sajal Biswas v. I.T.O, WD 24(1), HOOGHLY [I.T.O, WD 24(1), HOOGHLY] [ITA No.1244/KOL/2023] dated 26.03.2025. 6. M/s DURGA AUTOMOTIVES PVT. LTD. VS. DCIT, Circle- 1, Siliguri 2025 (4) TMI 1668 – ITAT Kolkata Dated 22.4.2025; 7. SHIB NATH GHOSH VS. ITO, Ward 42(1), ITA No.1812/Kol/2024 ITAT Kolkata dated 29.11.2024” 6. The Ld. Counsel for the assessee further submitted that the issuance of notice u/s 143(2) in proper format is a jurisdictional requirement and any defect therein goes to the root of the assessment proceedings. A notice issued in violation of law Printed from counselvise.com ITA No.5568/Del/2024 7 cannot confer jurisdiction on the Assessing Officer to proceed with scrutiny assessment. Therefore, he submits that the notice dated 21.08.2018 issued u/s 143(2) is invalid and un-enforceable in law. 7. Heard rival contentions, perused the materials placed before us and the case laws relied on. The contention of the assessee that the notice issued u/s 143(2) dated 21.08.2018 by the AO is in violation of the CBDT instruction dated 23.06.2017 as it is not in the specified format. This fact was not controverted by the Revenue before us. 8. We observed that on identical situation the Kolkata Bench of the Tribunal in the case of Hind Cyramics Pvt. Ltd. vs. DCIT in ITA Nos. 608 & 610/Kol/2024 dated 06.05.2025 quashed the assessment framed pursuant to the notice issued u/s 143(2) which was not in the prescribed format as per the CBDT instructions observing as under: “011. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised an additional grounds of appeal challenging the validity of the notice issued u/s 143(2) of the Act being in an invalid format and in our opinion the issued raised in the additional grounds is a purely a legal issue qua which all the facts are available in the appeal folder and no further verification of facts is required from any quarter whatsoever. In our considered view the assessee is at liberty to raise any legal issue before any appellate authority for the first time even when the same has not been raised before the Printed from counselvise.com ITA No.5568/Del/2024 8 lower authorities. The case of the assessee is squarely covered by the decisions of the Apex court in the case of i) Jute Corporation of India Ltd. Vs CIT (supra) ii) National Thermal Power Co. Ltd v. CIT (supra) and also by the decision of Hon'ble Calcutta High Court in PCIT vs. Britannia Industries Ltd. (supra). Therefore, we are inclined to admit the same for adjudication. 012. The Id. AR vehemently submitted that the notice u/s 143(2) of the Act issued to the assessee did not .specify whether it was a limited scrutiny or a complete scrutiny or a compulsory manual scrutiny. The Id. AR submitted that the CBDT has issued specifically provided vide instruction no. F. No. 225/157/2017/ITA-II Dated 23-06-2017, that the notice u/s 143(2) can be issued in one of the three format which have specifically prescribed but the present notice issued is not in accordance with such said instruction and therefore, the assessment framed consequently is invalid and void ab initio. 013. The Id. DR on the other hand submitted that this is a computer-generated notice and the non-mentioning of the fact of either limited or complete scrutiny or compulsory manual scrutiny would not render the issuance of notice u/s 143(2) of the Act as invalid. Therefore, additional ground raised by the assessee may kindly be dismissed. 014. After hearing the rival contentions and perusing the materials available on record, we find that undisputedly the notice issued u/s 143(2) of the Act dated 09.08.2018, specifies only computer aided scrutiny selection which neither mentioned it either to be a limited or a complete scrutiny nor compulsory manual scrutiny. Thus, the said notice has been issued in violation of the instruction issued by CBDT as noted above. In our opinion, the revenue authorities have to follow the instruction issued by CBDT and violation thereto would certainly render the notice as invalid with the result all the consequential proceeding would also be invalid. The case of the assessee find support from the decision of the co-ordinate Bench in the case of Tapas Kumar Das Vs. ITO (supra), wherein a similar issue has been decided in favour of the assessee. The operative part of the same is extracted below:- \"6. After hearing the rival contentions and perusing the materials available on record, we find that particularly the notice was issued u/s 143(2) of the Act, a copy of which is available at page no. 25 of the Paper Book. We note that the said notice has not been issued in consonance with the CBDT Instruction F No. 225/157/2017/ITA-II Dated 23.06.2017. The said notice is extracted below for the sake of ready reference:- Printed from counselvise.com ITA No.5568/Del/2024 9 7. In our opinion, the notice issued u/s 143(2) of the Act which is not in the prescribed format as provided under the Act is an invalid notice and accordingly, all the subsequent proceedings thereto would be invalid and void ab initio. The case of the assessee find support from the decision of Shib Nath Ghosh Vs. ITO in ITA No. 1812/KOL/2024 for A.Y. 2018-19 vide order dated 29.11.2024, wherein the co-ordinate Bench has held as under: - \"10. After hearing both the sides and the materials available on record, we find that the notice issued u/s 143(2) dated 9th August, 2017 was not in any of the formats as provided in the CBDT instruction F.No.225/157/2017/ITA-II dated 23.06.2017. We have examined the notice, copy of which is available at page no.1 of the Paper Book and find that the same is not as per the format of CBDT Instruction Printed from counselvise.com ITA No.5568/Del/2024 10 F.No.225/157/2017/ITA-II dated 23.06.2017 as stated above. In our opinion, the instruction issued by the CBDT are mandatory and binding on the Income tax authorities failing which the proceedings would be rendered as invalid. Hon'ble Apex Court in case of UCO Bank (supra) held that the circular issued by CBDT in exercise of its statutory powers u/s 119 of the Act, are binding on the authorities. The Hon'ble Apex court held as under: The Central Board of Direct Taxes under section 119 of the Income-tax Act, 1961, has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Act which are binding on the authorities in the administration of the Act. Under section 119(2)(a), however, the circulars as contemplated therein cannot be adverse to the assessee. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases Which can be properly categorized as belonging to a class, can thus be given the benefit of relaxation of law by Issuing circulars binding on the taxing authorities. In order to aid proper determination of the income of money lenders and banks, the Central Board of Direct Taxes issued a circular dated October 6, 1952, providing that where interest accruing on doubtful debts is credited to a suspense account, It need not be included in the assessee's taxable income, provided the Income-tax Officer is satisfied that recovery is practically improbable. Twenty-six years later, on June 20, 1978, in view of the judgment of the Kerala High Court In STATE BANK OF TRAVANCORE v. CIT [1977] 110 ITR 336, the Board by another circular, withdrew with immediate effect the earlier circular. However, by circular dated October 9, 1984, the Board decided that Interest in respect of doubtful debts credited to suspense account by banking companies would be subjected to tax but Interest charged in an account where there has been no recovery for three consecutive accounting years would not be subjected to tax in the fourth year and onwards. The circular also stated that if there is any recovery in the fourth year or later, the actual amount recovered only would be subjected to tax in the respective years. This procedure would apply to assessment year 1979-80 and onwards.\" Printed from counselvise.com ITA No.5568/Del/2024 11 8. Considering the facts of the instant case in the light of the decision of the co-ordinate bench, we are inclined to hold that notice issued u/s 143(2) of the Act is invalid notice and accordingly, the assessment framed consequentially to that is also invalid and is hereby quashed. 9. The other grounds raised on merit are not being decided at this stage and are being left open to be decided if need arises for the same at later stage. 10. In the result, the appeal of the assessee is allowed.\" 015. Since the facts of the assessee's case are similar to one as decided by the co-ordinate Bench, we therefore, respectfully following the same hold that the notice issued u/s 143(2) of the Act is invalid notice and accordingly, the assessment framed consequentially is also invalid and is hereby quashed. The additional ground raised by the assessee is allowed.” 9. Similar view has been taken by the Kolkata Bench of the Tribunal in the case of Sajal Biswas vs. ITO in ITA No. 1244/Kol/2023 dated 26.03.2025, Srimanta Kumar Shit vs. ACIT in ITA No.1911/Kol/2024 dated 19.11.2024, Tapas Kumar vs. ITO in ITA No.1660/Kol/2025 dated 11.3.2025. We observed that coordinate bench of Delhi Bench had taken similar view in the case of Anita Garg vs. ITO (supra). Therefore, facts being identical respectfully following the above said decisions, we hold that the assessment framed by the Assessing Officer u/s 143(3) dated 30.12.2019 pursuant to the notice issued u/s 143(2) dated 21.08.2018 which was not in the prescribed format as notified by the CBDT, is bad in law and void ab initio and the same is hereby Printed from counselvise.com ITA No.5568/Del/2024 12 quashed. The additional ground raised by the Assessee is allowed. 10. Since we have quashed the assessment allowing additional ground, all other grounds are not adjudicated as they become only academic at this stage. 11. In the result, appeal of the assessee is partly allowed as indicated above. Order pronounced in the open court on 27.08.2025 Sd/- Sd/- (M BALAGANESH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27.08.2025 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "