TMI Blog2007 (11) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... nits of assessment and if a notice u/s 34 of the Act is wrongly issued to the assessee in the status of an individual and not in the correct status of an HUF, the notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction. Thus, it is clear from the above that the Department cannot be permitted to change the status from the HUF to individual. Thus, assessment framed u/s 148/144 is not legally sustainable. Reasons recorded by the AO - We are of the view that the reopening has been done on the basis of the reason recorded on incorrect facts. That being so, the reasons are, in fact, no reasons at all. This view find support from the decision in the case of CIT vs. Atlas Cycle Industries [ 1989 (4) TMI 48 - PUNJAB AND HARYANA HIGH COURT] . Further, it is seen from the reason recorded that the purpose of reopening was to make verification of the investment made by the assessee. In the case of Manish Ajmera vs. Asstt. CIT [ 2005 (3) TMI 388 - ITAT CHANDIGARH-A] it has been held that the assessment made u/s 143(1) without issue of notice u/s 143(2) could not be reopened in the absence of any fresh material to show that income has escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of shares amounting to ₹ 10,00,000 loan and advances ₹ 2,47,343, cash in hand ₹ 13,259 and jewellery ₹ 14,88,884. 4. The AO noted that there was non-compliance on the part of the assessee despite various opportunities provided to him and that the wealth-tax assessment was also completed ex parte. Hence, he completed the assessment ex parte under s. 144 of the Act. He observed that as would be evident from the records of wealth-tax filed by the assessee for asst. yr. 1998-99 and the order under s. 16(5)/25 of the WT Act, 1957, the assessee had invested in the following : As the assessee failed to furnish the source of investment of ₹ 18,49,488 the AO treated the same as unexplained income of the assessee under ss. 68 and 69 of the IT Act. 4. On appeal before the CIT(A), the assessee has submitted that the AO has initiated the proceedings on the basis of wealth-tax assessment order dt. 28th March, 2002 in which the assessee had declared wealth of ₹ 17,36,227 consisting of investment in shares amounting to ₹ 1 lac, loans and advances of ₹ 2,24,343, jewellery of ₹ 14,88,884 and cash in hand at ₹ 13,259 on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant to explain his point of view but the assessee failed to avail of such opportunities. Hence, in view of the gross non-compliance on the part of the assessee, I hold that the AO was justified in passing the ex parte order determining the income of the assessee at ₹ 17,36,227 from undisclosed sources, and the same is upheld. The appellant s contention that the assessment order passed by the AO is null and void because it has been passed beyond the limitation period is not correct because the first notice under s. 148 dt. 6th Feb., 2003 was issued by registered post and the second notice under s. 148 dt. 26th Feb., 2003 was served by hand on 1st March, 2003 and the assessment order was passed on 24th March, 2004. Since, the assessment order has been passed within one year of the end of the financial year in which the notice under s. 148 were issued/served on the assessee, therefore, the order passed by the AO is a valid assessment order. Another contention of the appellant that since the proceedings had been initiated under s. 147 therefore, the AO could not pass order under s. 144 is also irrelevant because the assessment order has been passed mentioning s. 144/147. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceable. Thus, the assumption of justification under s. 148 is on wrong facts. Hence, the same is not legally sustainable. A reliance in this regard has been placed upon the decision in the case of CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P H) and the decision of Tribunal C Bench, New Delhi in ITA No. 5371/Del/2004, R.P. Gupta Son (HUF) (asst. yr. 199697) dt. 23rd Sept., 2005. The learned counsel has further submitted that reopening, as the reason suggests was for the purpose of making verification. That being so reopening to make roving enquiry is bad in law. A reliance in this regard has been placed to the decisions in the cases of Asstt. CIT vs. Star Ferro Alloys (P) Ltd. (2005) 94 TTJ (Del)(TM) 28 and Manish Ajmera vs. Asstt. CIT (2005) 96 TTJ (Chd) 896. Thus, the learned counsel has submitted that the very initiation of action under s. 147/148 is bad in law and assessment made pursuance to the said notice under s. 148 is liable to be quashed on this ground alone. 7. The learned Departmental Representative, on the other hand, has submitted that the return of wealth for the asst. yr. 1998-99 was filed before Dy. CIT, Circle 21(2), New Delhi whereas as per p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56-57). However, the AO passed the assessment order under s. 144 of the IT Act in the hands of Shri Raj Kumar Duggar (individual). Thus, the reopening has been made in pursuance of notice under s. 148 of the Act issued in the status of Raj Kumar Duggar (HUF) whereas the assessment has been made in the status of Raj Kumar Duggar (individual). In our view, the IT Act recognizes the status of the HUF different from individual status of Karta of the HUF. Two are treated as different legal entities. Therefore, it is necessary that notice under s. 148 of the Act should be sent in the correct status because jurisdiction to make assessment is assumed by issuing valid notice. Admittedly, in this case, the notice under s. 148 was sent to the HUF and assessment has been made in the hands of individual. In our view after having issued notice under s. 148 of the Act to HUF, the AO has no jurisdiction to make the assessment in the case of individual. In the case of CIT vs. K. Adinarayana Murty (supra), the notice was issued by the AO to HUF but assessment was made in the case in the status of individuals. Their Lordships observed as under (headnotes) : Under the scheme of the IT Act, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening has been done on the basis of the reason recorded on incorrect facts. That being so, the reasons are, in fact, no reasons at all. This view find support from the decision in the case of CIT vs. Atlas Cycle Industries (supra). Further, it is seen from the reason recorded that the purpose of reopening was to make verification of the investment made by the assessee. In the case of Manish Ajmera vs. Asstt. CIT (supra) it has been held that the assessment made under s. 143(1) without issue of notice under s. 143(2) could not be reopened in the absence of any fresh material to show that income has escaped assessment and reopening for making fishing inquiry was not valid. 11. In view of the above discussion, we hold that the initiation of the proceedings under s. 148 of the Act is not legally sustainable and as such assessment framed in pursuance of the said notice is liable to be quashed on this ground alone. Since we have quashed the assessment made in the matter on the legal ground as aforesaid, the other grounds taken by the assessee will not survive. In this regard a reference may be made to the decision in the case of Rahul Kumar Bajaj vs. ITO (1999) 64 TTJ (Nag)(SB)182 : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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