SHIB NATH GHOSH,BERHAMPORE V. I.T.O., WARD - 42(1), MURSHIDABAD

ITA 1812/KOL/2024

AI Insights

The case involves Shib Nath Ghosh, the appellant, contesting the validity of an assessment order for the Assessment Year 2018-19, which was based on a notice issued under section 143(2) of the Income Tax Act, 1961. The notice was challenged for not adhering to the prescribed formats as per a CBDT circular, leading to the argument that the subsequent assessment was without jurisdiction. The Tribunal, referencing decisions from the Hon'ble Apex Court and Calcutta High Court, found in favor of the appellant, declaring both the notice and the assessment invalid.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472601 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-10-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 26-08-2024
• Other Referred Cases: National Thermal Power Co. Ltd. Vs. CIT, UCO Bank Vs. CIT, Amal Kumar Ghosh vs. ACIT and Ors., PCIT vs. Weilburger Coatings (India) P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADIP BISWAS
• Assessee Lawyers: S. K. TULSIYAN
• Keywords: Invalid notice; Question of law; Bad and doubtful debts; Competent authority
• Section: 143(3); 143(2); 119

Judgement Text

" आयकर अपीलीय अधिकरण न्यायपीठ, कोलकाता । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI SONJOY SARMA, JUDICIAL MEMBER I.T.A. No. 1812/KOL/2024 Assessment Year: 2018-19 SHIB NATH GHOSH 16, Peary Mohan Sen Road, Berhampore, Murshidabad-742101 [PAN :AELPG4724N] Vs Income Tax Officer, Ward 42(1), Mursidabad,39, R.N. Tagore Road, Berhampore, Dist. Murshidabad (WB), PIN-742101 अपीलार्थी/ (Appellant) प्रत्‍ यर्थी/ (Respondent) Assessee by : Shri S.K. Tulsiyan, AR Revenue by : Shri Pradip Biswas, DR सुनवाई की तारीख/Date of Hearing : 28.10.2024 घोषणा की तारीख /Date of Pronouncement : 29.11.2024 आदेश/O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: This appeal is filed by the Shib Nath Ghosh (Assessee / Appellant) against the appellate order passed by the National Faceless Appeal Centre, Delhi [hereinafter referred as Ld. CIT(A)] dated 8th August, 2024, for Assessment Year 2018-19, whereby the appeal filed by the Assessee against the assessment order dated 20th April, 2024, passed by the Income Tax Officer, national e- assessment center (Ld. AO) under section 143(3) read with section 144B of the Income Tax Act, 1961 (the Act) computing the total income of the Assessee as Rs.57,38,240/-, was dismissed. 2. Besides the grounds raised in the memorandum of appeals , the assessee has also raised additional grounds before us which are reproduced hereunder Page | 2 ITA No.1812/KOL/2024 Shib Nath Ghosh; A.Y. 2018-19 “1. That the ld. AO erred in issuing notice u/s 143(2) of the Act dated 09.08.2017 without complying to the CBDT Instruction F.NO.225/157/2017/ITA-II dated 23-06-2017 and so the notice issued u/s 143(2) is not valid as per law. 2. That the assessment order u/s 143(2) passed 30.12.2019 provides that the return was selected for limited scrutiny on the issue “Excess Contribution to provident Fund, Superannuation Fund or Gratuity Fund: and so the additions made in the assessment order is without jurisdiction.” 3. After hearing both the parties and perusing the material available on record, we find that the issues in the additional grounds raised by the assessee are purely legal issues the facts qua which are available in the assessment folder and do not require any further verification of facts at the level of the AO. The assessee submitted that the issue is supported by the decision of Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 0383, wherein it was held that the Tribunal will have the discretion to allow or not allow a new ground raised but where the Tribunal is required to consider the question of law arising from the facts which are on record in the assessment proceedings such a question should be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Therefore considering the facts and circumstances, we are inclined to admit the additional grounds raised by the assessee for adjudication. 4. The first issue raised by the assessee in the first additional ground is with regard to not following the CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017, while issuing notice u/s 143(2) of the Act on 09.08.2017 and consequently the said notice was invalid in law. 5. The ld. Counsel for the assessee vehemently submitted that the notice issued u/s 143(2) of the Act dated 9.08.2017 was not in consonance with CBDT Circular no. F.No.225/157/2017/ITA-II dated 23.06.2017 and therefore, the same is invalid and Page | 3 ITA No.1812/KOL/2024 Shib Nath Ghosh; A.Y. 2018-19 assessment based on the said notice is also invalid. The ld. Counsel for the assessee referring to the said circular of the CBDT, copy of which is filed at Paper Book page no.56 to 61, submitted that the said circular mandates that the notice u/s 143(2) of the Act, has to be issued in either of the three format; (i) Limited Scrutiny (Computer Aided Scrutiny Selection) (ii) Complete Scrutiny (computer Aided Scrutiny Selection) (iii) compulsory manual Scrutiny. 6. The ld. Authorised Representative vehemently contended that the ld. AO is under obligation to issue the notice in any of the format according to the nature of scrutiny failing which would rendered the issuance of notice in violation of the mandate given by the CBDT Instruction no. F.No.225/157/2017/ITA-II dated 23.06.2017. The ld. Authorised Representative, while referring to the copy of the notice issued u/s 143(2) of the Act dated 09.08.2018 a copy of which is attached at page no.1 of the Paper book, submitted that the said notice was not issued in any of the three formats as contemplated by the above circular. Therefore, the notice itself is invalid rendering the assessment framed to be invalid. 7. The ld. Authorised Representative further in support his argument referred Hon'ble Apex Court decision in the case of UCO Bank Vs. CIT (1999) 237 ITR 889 (SC), wherein the Hon'ble Apex court stated that the CBDT u/s 119 of the Act 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 u/s 119 of the Act which are binding on the authorities below in the administration of the Act. The Hon'ble Apex Court held that u/s 119(2)(a) of the Act, the circular as Page | 4 ITA No.1812/KOL/2024 Shib Nath Ghosh; A.Y. 2018-19 contemplated therein cannot be adverse to the assessee and the power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It was further held that it is the 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. Similarly, the ld. Counsel for the assessee relied on the decision of Calcutta High Court in the case of Amal Kumar Ghosh vs. ACIT and Ors. (2014) 361 ITR 458 (Cal), wherein the Hon'ble Court held that circulars issued by CBDT u/s 119 of the Act are binding upon the department. The ld. Authorised Representative, further prayed that the notice issued u/s 143(2) of the Act may kindly be held as invalid and the assessment framed by the ld. AO may kindly be quashed. 8. Arguing on the second limb of his augment, the ld. Authorised Representative submitted that the case of the assessee was selected for limited scrutiny as it is apparent from page 1 of the assessment order where the selection was made for excess contribution to the provident fund/superannuation Fund or gratuity fund. It means that it is only for the purpose of that particular issue and going beyond the scope of that issue a special permission of the competent authority is required to be obtained by the ld. AO before embarking upon the enquiry into those issues and thereafter passing the assessment order accordingly but that was not done. The ld. Authorised Representative further prayed that the assessment was framed by the ld. AO is without jurisdiction and addition made are liable to be deleted on this count. The ld. Counsel for the assessee relied on the decision of Calculate High Court in the case of PCIT vs. Weilburger Coatings (India) P. Ltd. (2023) 155 taxmann.com 580 (Calcutta) dated Page | 5 ITA No.1812/KOL/2024 Shib Nath Ghosh; A.Y. 2018-19 11.10.2023, wherein the Hon'ble Court upheld the order of the Tribunal wherein the Tribunal deleted the disallowance made by the ld. AO on the ground that the AO exceeded his jurisdiction of enquiry into those issues which are beyond the scope of limited scrutiny. The ld. Authorised Representative stated that in the present case, the assessee selected for scrutiny only in order to examine the excess contribution towards provident fund/superannuation Fund or gratuity fund, where no addition was mad on that count. However, the additions were made on two issues namely (1) on account of reconciliation of 26AS ₹3,28,750/- and disallowance of creditors of ₹38,74,380/-. The ld. Authorised Representative further submitted that the order passed by the ld. AO was kindly be quashed as being invalid for the reason that he exceeded his jurisdiction. 9. The ld. DR relied on the orders of the authorities below by submitting that so far as the first issue is concerned of not issuing notice u/s 143(2) in either of the formats as provided in CBDT Circular No. F.No.225/157/2017/ITA-II dated 23.06.2017, is not in hand of the ld. AO as these notices were computer generated and the ld. AO has no authority to modify the contents of these notices. Therefore, the plea raised by the ld. Counsel for the assessee may kindly dismissed. On the second issue also, the ld. DR submitted that though the case of the assessee was selected for completed scrutiny, however, only one issue was stated in the said notice, therefore, the claim of the ld. Counsel for the assessee that it was limited scrutiny is wrong and may kindly be dismissed. 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 Page | 6 ITA No.1812/KOL/2024 Shib Nath Ghosh; A.Y. 2018-19 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 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.” 11. Similarly, Hon'ble Calcutta High Court in case of Amal Kumar Ghosh (supra), held as under:- “Held, allowing the appeal, (1) that even assuming that the intention of the Central Board of Direct Taxes was to restrict the time for selection of the cases for scrutiny to a period of three months, It could not be said that the selection in the case of the assessee was made within the period. The return was filed on October 29, 2004, and the case was selected for scrutiny on July 6, 2005. By any process of Page | 7 ITA No.1812/KOL/2024 Shib Nath Ghosh; A.Y. 2018-19 reasoning, it was not open to the Tribunal to come to a finding that the Department acted within the four corners of Circulars Nos. 9 and 10 Issued by the Central Board of Direct Taxes The circulars were evidently violated. The circulars were binding upon the Department under section 119.” 12. Therefore case of the assessee is therefore squarely covered by the ratio laid down in the above decisions and respectfully following the same , we are inclined to hold the assessment as invalid being based on the invalid issue of notice u/s 143(2) of the Act. The first additional ground raised by the assessee is allowed. 13. Since we have held the notice issued u/s 143(2) as invalid and so the consequential assessment framed, we are not adjudicating second legal issue raised in the additional ground no.2 as well the grounds in the memorandum of appeal and are left open to be adjudicated in future if the need arises for the same. 14. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 29th November, 2024 at Kolkata. Sd/- Sd/- (SONJOY SARMA) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated 29.11.2024 *SS, Sr.Ps आदेश की प्रतततिति अग्रेतषत/Copy of the Order forwarded to : 1. अिीिार्थी / The Appellant 2. प्रत्यर्थी / The Respondent 3. संबंतित आयकर आयुक्त / Concerned Pr. CIT 4. आयकर आयुक्त ( अिीि ) / The CIT(A)- 5. तवभागीय प्रतततनति , अतिकरण अिीिीय आयकर , कोिकाता/DR,ITAT, Kolkata, 6. गार्ड फाईि / Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Sr. PS/ Assistant Registrar आयकर अिीिीय अतिकरण ITAT, Kolkata "