TMI Blog2012 (12) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant: Mr. N.P. Sahni, Advocate. Respondent: Mr. Sanjeev Sabharwal, Sr. Standing Counsel. MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT) Facts: 1. The present appeal under section 260A of the Income Tax Act, 1961 (hereafter called the Act ) is directed against the order dated 20.03.2008 by the Income Tax Appellate Tribunal (ITAT), Delhi Bench 'C'. By the impugned order, ITAT upheld the addition of Rs.31 lacs made by the Assessing Officer (AO) holding that the appellant had failed to establish the creditworthiness and genuineness of the transaction of the impugned gift. As regards certain other gifts worth Rs.74,914/- the Tribunal restored the matter back to the A.O. The ITAT upheld the validity of the notice under section 148 of the Act, thereby dismissing the cross objections filed by the appellant. The question of law urged on behalf of the assessee is regarding the correctness of the ITAT s order, upholding the addition, and also refusing to interfere with the re-opening of assessment, by the AO. 2. The year under consideration is 1995-96; the appellant had, during the period, received a gift worth Rs.31 lacs from an NRI, Shri Jagjit Singh Kochar. The gift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 383, where the following observations, similar to the ratio in Chhugamal (Supra), were reiterated: "..in so far as the basis for the reasons is concerned, even this is absent. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer has not even recorded his satisfaction about the correctness or otherwise of the information or his satisfaction that a case has been made out for issuing a notice under Section 148 of the Act. Read in this light, what has been recorded by the Assessing Officer as his "reasons to believe" is nothing more than a report given by him to the Commissioner of Income Tax. As held by the Supreme Court in Chhugamal Rajpal, the submission of a report is not the same as recording of reasons to believe for issuing a notice. The Assessing Officer has clearly substituted form for substance and, Therefore, the action of the Respondent falls foul of the law laid down by the Supreme Court in Chhugamal Rajpal which is clearly applicable to the facts of these appeals." 4. The appellant relied on the judgment of the Supreme Court in CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well-settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences". 6. The High Court may, therefore, issue a high prerogative writ prohibiting the Income-tax Officer from proceeding with reassessment when it appears that the Income-tax Officer had no jurisdiction to commence proceeding." Thus, it is imperative to understand that reassessment without jurisdiction cannot be initiated. Any proceeding without the jurisdiction is bad in law. 7. The appellant contended that the addition aggregating to Rs.31,74,914/- which had been made by the A.O. u/s 68 of the Act was incorrect as she (the assessee) provided substantial evidence to prove the identity, creditworthiness and genuineness of the gifts received. Thus, the additions cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gift amount through banking channel is not sufficient to prove the genuineness of the gift. It was argued that it is strange that the Appellant is, for the first time, contending in third appellate proceedings that the notice under Section 148 issued to her on 28.03.2002 by the ACIT Circle 30(1), New Delhi was illegal and void ab initio. The Revenue has relied on the judgment of Phool Chand Bajrang Lal v. ITO (1993) 203 ITR 456 (SC) wherein the following was stated by the Court: "..We have to look to the purpose and intent of the provisions. One of the purposes of Section 147, appears to us to be, to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say "you accepted my lie, now your hands are tied and you can do nothing". It would be travesty of justice to allow the assessee that latitude." The next case that the Revenue has relied upon is Sardar Harvinder Singh Sehgal v. ACIT (1997) 227 ITR 512 wherein the court has held that: "27. The court can examine the reasons only in a limited way. If any authority is required for this proposition one can have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1), New Delhi. Furthermore, the assessee has submitted to the jurisdiction of the ACIT, Circle 28(1), New Delhi during the assessment proceedings without raising any objections on the jurisdiction. Further, the CIT (A) after having referred to the provisions of Section 124(3) of the Act had observed that the return was filed on 28.12.1995, i.e., u/s 139(4) of the Act and the assessee's right to dispute the jurisdiction of the A.O. was lost after the period of 30 days. Analysis and Findings 14. The Court would first deal with the question of jurisdiction. In this court s opinion, the assessee s grievance as to the legality of the notice under Sections 147/148 is unfounded. The Appellate Commissioner as well as the ITAT have in their reasoned orders, concurrently upheld the reopening of assessment; the grounds mentioned in the reasons to believe cannot be faulted, having regard to the lack of particulars which existed even in the original returns. As far as the question of territorial jurisdiction, i.e. whether it was that of ITO Ward 28 or 30 is concerned, the Court notices that the assessee understood her rights correctly, and filed the returns before the concerned offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public policy, not to allow questions of territorial jurisdiction to be urged and destabilize entire proceedings, once they proceed on merits. In a sense, this procedure is akin to the one mandated by Section 21 of the Code of Civil Procedure, which allows challenge to jurisdiction of the court, on issues of territoriality up to a point, after which the concerned party cannot contend prejudice. In view of this position, it is too late in the day for the assesee to contend that the AO who completed re-assessment proceedings, lacked jurisdiction to do so, under the re-structured dispensation. 15. In this case, the appellant s case is that on inspection of the assessment records it was revealed that ACIT Circle 30 (1) had recorded the following reasons for initiating proceedings under Section 147 of the Act: The Addl. Director of Income Tax (Inv) Unit CIB, New Delhi has intimated vide his letter dated 16-12-1997 bearing No. Add. DIT (Inv) NRI/Gift/JSK/97-98 that the assessee has received bogus gifts from Shri Jagjit Singh Kochar and Smt. Rubinder Singh Kochar (NRIs) against the payments made in cash along with premium. The amount of the said bogus gifts is to be assessed in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148. From the report submitted by the Income Tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assesse s omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year 17. During the reassessment proceedings too, the revenue did not in any manner substantiate the suspicion which made it, in the first instance, to issue notice under Section 148 regarding the allegedly fraudulent gift received by the assessee. Ultimately, the entire reassessment proceedings initiation was premised on a vague suspicion. Reasons to believe as emphasized by the court are reasonable inferences based on objective information, verified in a prima facie manner. There was nothing on the record for the AO to assume that the information about the gifts in question being bogus, was believable, or reasonably credible to warrant reopening of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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