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Home Articles Income Tax DEV KUMAR KOTHARI Experts This

NOTICES RELATING TO REASSESSMENT PROCEEDINGS WITHOUT APPLICATION OF ANY MINDS –notice to agent like authorized signatory in bank account, for allegations of escapement of income in hands of agent.

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NOTICES RELATING TO REASSESSMENT PROCEEDINGS WITHOUT APPLICATION OF ANY MINDS –notice to agent like authorized signatory in bank account, for allegations of escapement of income in hands of agent.
DEV KUMAR KOTHARI By: DEV KUMAR KOTHARI
May 25, 2022
All Articles by: DEV KUMAR KOTHARI       View Profile
  • Contents

In case of reassessment proceedings notices are issue many times without any or proper application of mind by the AO and approving authority (Pr. CIT).

Recently also such notices are issued.

For example, in case of authorized signatory (AS) (for banking operations of companies or other principals), notice  is  issued for deposits found in account of principals for whom authorized signatory (AS) worked as an agent.

Such notices might be issued to many or all of authorized signatories.

We have also seen cases of notices issued to all joint holders of bank accopunts, mutual funds, .. etc. ignoring principal owner holder.

This is totally without application of mind. Because   authorized signatory (AS) is an agent and principal is also known to the bank and IT department. Then how a notice is issued to authorized signatory (AS) is shockingly surprising.

It can only be if concerned officers have no idea at all about relationship of principal and agent.

For example, information in a notice is reproduced below, with changes or omission about personal details  and other details  for maintaining secrecy.

To,

Assessee  ….  Xx   PAN  xx     AY xx  DIN & Letter No :  xxxx   dt. Xx 

 Sir/ Madam/ M/s, Subject: Subsequent proceedings with reference to section 148A(b) in consequence to Hon'ble SC Order dated 04.05.2022 – Letter

1. Name of the assessee  xxx  

2. PAN  xxx

3. Status Individual

4. Assessment year  in respect of which it is proposed to issue notice u/s 148  2016-17

Sir/Madam

Sub: Forwarding of information in accordance with the order dated 04.05.022 of the Hon’ble Supreme Court in the case of UNION OF INDIA & ORS. VERSUS VERSUS ASHISH AGARWAL [2022 (5) TMI 240 - SUPREME COURT]-regarding.

In reference to the above, Hon’ble Supreme Court vide its judgement dated 04.05.2022 (2022 SCC Online SC 543), in the case of UNION OF INDIA & ORS. VERSUS VERSUS ASHISH AGARWAL [2022 (5) TMI 240 - SUPREME COURT]has held the notice issued u/s 148 during the period beginning on 1st April 2021 and ending with 30th June 2021, to be a show cause notice u/s 148A(b) of the Income Tax Act 1961.

Hon’ble Supreme Court has held that these reassessment notices issued u/s 148 under the old law shall be deemed to be the show cause notice issued under clause (b) of Section 148A of the new law substituted with effect from 1 st April 2021. A notice u/s 148 for A.Y xxx  has been issued to you on xxxx . The judgment applies to all cases where extended reassessment notices have been issued irrespective of the fact whether such notices have been challenged or not.

  1. In this regard, in compliance with the subject order of the Hon’ble Supreme Court, you are hereby provided with information and material relied upon by this office for issue of the show cause notice as above.
  2. The detail of which is provided as under:-

The information has been shared by the Investigation wing  

Credit Card No.  Card Issuer Name          Credit Limit

Xxxx                      xxx       BANK               Rs. 10 lakhs

Xxx                        xxx        BANK               Rs. 03 lakhs

3.2 A perusal of the details of the above credit cards reflects that the assesseee is a director of M/s  xxxxx    Ltd ls which is a registered  company and the above personal credit cards have been used for business transactions for large value of transactions.

 A perusal of the transactions of the said credit cards reflects that the assessee has made excess payments in the said credit cards and is maintaining a huge excess balance of Rs. xxxx  crores whereas the credit limits for the said two cards are Rs. 10 lakhs & Rs. 03 lakhs only.

3.3 Further, during the relevant year, in respect of the following accounts, the assessee is the authorized signatory and his PAN has been updated in the records of these accounts:

Account Number   Institution    Credit Transactions (INR)

Xxxxx                         xxxx  Bank    xxx  

Xxxx                          xxxx   Bank   xxxx  

Xxxxx   xxxx  

TOTAL OF ALL CREDITS    2.2 crores

3.4 The above credits in the accounts of the assessee to the tune of Rs. 2.2 crore  during the relevant year is not in commensurate with the ITR of the assessee and Therefore, the information suggests that income chargeable to tax has escaped assessment.

4. In accordance with the aforesaid judgment you are required to furnish the reply regarding why reassessment u/s 147 of the Income Tax Act may not be made in your case. The reply may be furnished within 2 weeks (by  xx  .xx .2022). You may submit your response in ‘e-proceedings’ facility through your account in e-filing portal of the Income Tax Department.

Xxxxxx . CIRCLE  xxxx  , xxxx

From the above notice it is clear that the Ld. AO is aware about:

Status of assessee as an individual who has been authorsed by  his principals who are account holders in banks from the following contents of notice :

From the notice with changes for secrecy

Observations

Status  Individual

The AO knows that the assessee is an individual and not a company

Assesseee is a director of M/s  xxxxx    Ltd 

the AO knows that the principal is a company known to the AO

the assessee is the authorized signatory and his PAN has been updated in the records of these accounts

The AO knows that the assessee is AS his PAN is recorded as per KYC requirements. He knows principals.

Account Number   Institution    Credit Transactions (INR)

Xxxxx                         xxxx  Bank    xxx 

Xxxx                          xxxx   Bank   xxxx 

Xxxxx   xxxx 

TOTAL OF ALL CREDITS    2.2 crores

AO has not given complete information about account holders who are principals of assessee. This is a deliberate omission made by the AO to hold that deposits have been made in account of assessee.

The above credits in the accounts of the assessee to the tune of Rs. 2.2 crore 

‘the above credits in the accounts of the assessee’ -

This is a deliberate and patently wrong statement made by AO who knows names of principal for whom assessee was AS

above personal credit cards have been used for business transactions for large value of transactions.

A perusal of the transactions of the said credit cards reflects that the assessee has made excess payments in the said credit cards

Credit limit is upper limit. In every statement cycle one can use such limit  even more than one time by paying to credit card issuer from time to time so that credit limit is made available again once payment is made.

   

Preliminary reply:

 In such case a preliminary reply can be given with strong protest. And complaints can be made to sr. officers and vigilance wing to avoid corruption and harassment.

A suggested line of reply is given below:

From Assessee

To the AO

Sir,

PAN:  xxx   Assessment Year:  xxxx

Preliminary reply to DIN & Letter No :  xxxxx Dated: xxxx  to seek protest and to seek  complete information. In connection with  notice for subsequent proceedings with reference to section 148A(b) in consequence to Hon'ble SC Order dated 04.05.2022 –  your Letter received in email on xxxx 

In your letter only summary of details are provided. It is clear that the summary includes details of accounts of other parties, in which I am an authorized signatory so my PAN is also provided in KYC details with the bank. This does not mean that I am owner / beneficial holder of those accounts.  This fact is completely known to you but you have deliberately issued wrong notice to me.

As an authorized signatory I am only an agent of person who has appointed or designated me to operate account as authorized signatory.  This fact is completely known to you but you have deliberately  ignored it just to issue me a  wrong notice.

You have mentioned only institution / bank , account number and credits found in the accounts.

It seems that  you have deliberately and in a patently wrong manner   assumed that all these accounts belong to me personally and therefore, huge sums credited in these accounts belongs to me and these are not reflected in my ITR, therefore there is apprehension of escaped income in my case.

In your letter the following are mentioned:

“ 3.3 Further, during the relevant year, in respect of the following accounts, the assessee is the authorized signatory and his PAN has been updated in the records of these accounts:

Account Number   Institution    Credit Transactions (INR)

Xxxxx                          xxxx                xxxxx

TOTAL OF ALL CREDITS 2.2 crores

The above credits in the accounts of the assessee to the tune of Rs. 2.2 crore  during the relevant year is not in commensurate with the ITR of the assessee and Therefore, the information suggests that income chargeable to tax has escaped assessment.

Therefore, there is clear contradiction in your observations and apprehensions because:

 On one hand you have admitted that my PAN is reflected in these accounts because I am an authorized signatory.

You also know for whom I acted as authorized signatory /AS

An authorized signatory is always an agent. In case of own account one need not to have authority from another to operate account.

Once I am found a simple authorized signatory, your assumption that these sums can be taxable in my hands is contradictory.

In case of any account holder, particularly in case of companies having commercial activities of high volumes of turnover there can be many authorized signatories. Any of such authorized signatory is not owner of amounts standing in account of principals.

It seems that without checking details with PAN of account holder /  my principal for whom I am acting as authorized signature  you have assumed me as a person who can be assessed in respect to credits found in accounts of  my principals.

The information provided in your letter is incomplete.

Please provide me the following:

  1. details of account holders on whose behalf I am authorized signatory to operate the account.
  2.  Full bank statements in your possession  / or obtain from bank and provide to me,which will show details of account holder and nature of transaction in narration. Which have no connection with my income except some minor payments made to me for my remuneration.
  3. Result of your  complete enquiry  about information which you have vis a vis ROI of account holders and  my ROI, based on which you have assumed escaped income in my case.
  4. Basis of your considering me as assesse whose income has escaped or  might be included in those statement which shows total sums as per your letter issued to me.

Without complete information provided to me how can I examine them with my accounts and accounts of my principals and respond and submit reply to your letter?

Only after receipt of above information I will be able to submit complete reply.

I completely deny any escapement of income taxable in my case, based on incomplete information provided in your noticed.

It seems that you are deliberately withholding full information and wrongly drawing wrong assumptions against me.

This is a clear case of  deliberate negligence, omissions, and mistakes which cannot be called inadvertent mistakes.

All these are designed to harass assessee, to make high pitched assessments / reassessment and show false efficiency of AO and his seniors and department in totality.

This is causing sheer wastage of public money in maintaining Tax officers and personal hard earned money of assessee.

I assure my best possible and required cooperation.

Assessee

 

By: DEV KUMAR KOTHARI - May 25, 2022

 

 

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