TMI Blog2013 (4) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... deletion of addition of ₹ 10,00,000/- made on account of unexplained gifts u/s. 68 of the IT Act whereas all the the assessees have filed their cross-objections challenging the impugned order of ld. CIT(A) in confirming the validity of reopening of the assessment u/s. 147 of the IT Act. During the course of arguments, it was elaborated that the assessee challenged the validity of reopening of assessments - that there was no escapement of income; that there was no failure on the part of the assessee to disclose all the true and material facts relating to assessment and that assumption of jurisdiction by the AO u/s. 148 of the IT Act is bad in law because the notice u/s. 148 have not been issued and served upon the assessees validly in accordance with law. 3. The ld. representatives of both the parties submitted that the issues are same in all the departmental appeals and the cross-objections filed by the assessees and both the parties mainly argued in the case of Late Shri Satish Prakash Mittal in ITA No. 560/Agr/2012 and cross-objection No. 06/Agra/2013 and submitted that issues and facts are identical in the remaining cases. Therefore, for the purpose of disposal of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived un-served with the remarks of the Postal Authorities left . The AO considering the material on record found that donor not only had given gift to the assessees but also to other persons through his various bank accounts and the assessee has failed to discharge the onus upon him to prove the identity of the donor, his capacity to give gift and genuineness of the gift in the matter. The AO, therefore, held the gift of ₹ 10,00,000/- to be unexplained u/s. 68 of the IT Act and computed the income of the assessee accordingly at ₹ 13,68,969/-. The assessee challenged the validity of re-assessment proceedings before the ld. CIT(A) as well as the addition on merits. The ld. CIT(A) considering the material on record confirmed the order of the AO in initiating the proceedings u/s. 147/148 of the IT Act and dismissed this ground of appeal of the assessee. However, on merits, the ld. CIT(A) allowed the appeal of the assessee holding that the assessee has established the identity of the donor, his creditworthiness and genuineness of the transaction of gift by producing necessary evidences. Therefore, the additions on merits were deleted in all the cases of various assessees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1 : Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2 : For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Whether the AO has validly initiated the re-assessment proceedings u/s. 147/148 of the IT Act. 8. According to the AO, the assessee filed original return of income on 28.03.2001 at income of ₹ 3,68,969/-. Copy of the acknowledgement of the return of income along with annexures are filed in the paper book at CPB-119 to 122, in which the assessee has declared all the particulars and information of receipt of gift of ₹ 15,00,000/-. The assessment was completed at income of ₹ 8,68,969/- u/s. 143(3)/147 vide order dated 30.03.2006 after making addition of ₹ 5,00,000/- on account of unexplained gift received from Sh. Sanjay Mohan Agarwal. The said addition was deleted by the ld. CIT(A)-II, Agra vide order dated 24.04.2008. It is noted in this assessment order that information was received from ADIT (Inv.) that Shri Sanjay Mohan Agarwal of New Delhi is involved in giving bogus gifts by cheques/DDs in lieu of cash received from the intended beneficiaries. In the subsequent impugned reassessment order, under appeal, dated 10.12.2008 the same fact finds mention that information was received from the investigation wing, Ghaziabad that the assessee has taken gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gifts/1/2006-07/796 dated 16.03.2007 endorsed vide F.No. Addl. CIT/R- 5/Firozabad/Information/2006-07 dated 21.03.2007 of the Addl. Commissioner of Income-tax, Range-5, Firozabad has informed that one Sh.Sanjay Mohan Agarwal, 4674, Shora Kothi, Pahar Ganj, New Delhi was engaged in providing accommodation entries by way of gift to the needy persons. A list of the persons who have taken accommodation entries from him was also enclosed with the said letter of Addl. DIT(Inv). Consequently, inquiries were conducted from Vijaya Bank, Firozabad and it was gathered that the assessee has taken accommodation entry of ₹ 10,00,000/- by way of gift vide D.D. No.005105 dated 04.11.99.The said D.D. has been credited to the saving bank account of the assessee maintained with Oriental Bank of Commerce, Firozabad. The assessee has thus introduced his own unaccounted income in the garb of a gift just to get away from payment of tax on that unaccounted income, which was clearly liable to tax as per provisions of I.T. Act. No amount of DD credited to the bank account of the assessee has been added to the income of the assessee as per order u/s. 143(3) dated 27.03.2006. I have, therefore, in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned bank, in which the bank account of these persons were maintained and it has been confirmed by the Bench that all the eight assessee s have received gift amounts. From the findings of the ld. CIT(A), it is clear that ADIT (Inv.), Ghaziabad has provided some vague information regarding accommodation entries received by the assessees. The assessee has filed copy of the remand report dated 30.04.2012 issued by DCIT (Inv.), Ghaziabad (PB-141), in which while filing the remand report regarding the assessees, the DCIT has mentioned that record of investigation wing have been verified and no such records regarding investigation in the case of S.M. Agarwal have been found. He has referred to letter of ADIT (Inv.), Ghaziabad dated 16.03.2007 addressed to CIT(A)-II, Agra that DD/Cheques have been issued to the beneficiaries through Vijaya Bank, Anasari Road, New Delhi and that the Assessing Officer can call for the record from the Bank. The ld. CIT(A) while finalizing of the appeals of the assessee recorded the order sheet and the relevant order sheet of dt. 20.06.2012 is filed by the assessee at page 148 of the paper book and the relevant entry contained in the order sheet dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in his account prior to giving of the gift. The AO at the appellate stage expressed his inability to provide any evidence to show that the gift was given out of cash deposit made by the assessee because no such details wee available with the investigation wing, Ghaziabad. These facts would, therefore, clearly support the contention of the ld. counsel for the assessee that the reasons for reopening of assessment were incorrect and without any basis or material. The assessee has not introduced any unaccounted income for issue of DD of gift. Whatever information was received from the Investigation Wing, Ghaziabad, as per reasons recorded by the AO, was also incorrect because these information were already on record of the AO as on earlier occasion, re-assessment proceedings were finalized vide assessment order dated 30.03.2006. There was nothing new with the AO to show that the assessee has received any bogus accommodation entries or has introduced any unaccounted money. Thus, the reasons recorded for reopening of the assessment were vague, incorrect and based on no material or evidence. Whatever is recorded in the reasons for reopening of assessment was not supported by the rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation wing, Ghaziabad was nothing. The reasons did not satisfy the requirement of section 147 of the IT Act. There was no reference to any document or material with the report of investigation wing, Ghaziabad. Thus, the same could not be regarded as a material or evidence that prima facie showed nexus or link which discloses the escapement of income. The letter of investigation wing, Ghaziabad did not point out the fact that there was any escapement of income in the case of assessee. Therefore, it is clear that the AO did not apply his own mind to the vague information and did not examine the basis or material, if any, to support such information. The decision of Hon ble Delhi High Court in the case of Signature Hotels Pvt. Ltd. (supra), thus, squarely apply to the facts and circumstances of the case. The ld. DR, however, relied upon the decision of Hon ble Delhi High Court in the case of Rajat Export Import India Pvt. Ltd. vs. ITO, 18 Taxman.com 311, in which the assessee was not in a position to deny that the material relied upon by the AO at the time of recording the reasons for reopening of assessment did not contain entry linking S. Ltd. with the assessee, issue of noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .04.2008. Thus, there was no failure on the part of assessee to file return u/s. 139 or u/s. 148 of the Act. There was no non-compliance of notice u/s. 142(1) of the IT Act. The assessee disclosed all primary facts and the AO examined the information received from investigation wing regarding the gift received by the assessee from the donor Shri Sanjay Mohan Agarwal and in the same month of November, 1999, gift of ₹ 10,00,000/- was also received from the same donor which is under consideration of the present appeal. It is highly unbelievable that the AO while considering the issue of gift received from Sanjay Mohan Agarwal, donor would not have examined the issue of receipt of gift in detail because the assessee has disclosed receipt of ₹ 15,00,000/- as gift from Shri Sanjay Mohan Agawal, donor in the original return of income itself. Thus, the assessee disclosed fully and truly all material facts necessary for his assessment for the assessment year under appeal. The four years have expired from the end of the relevant assessment order on 30.03.2007 when again reassessment proceedings wee initiated against the assessee. The ld. counsel for the assessee relied upon the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings could have been initiated under section 148 of the Income-tax Act, 1961, after the expiry of a period of four years from the end of the relevant assessment year. Thus, the initiation of reassessment proceedings was barred by limitation and the assumption of jurisdiction by the Assessing Officer was invalid. The notice under section 148, therefore, could not be sustained. 9.4 Hon ble Madras High Court in the case of Sri Sakthi Textiles Ltd. vs. JCIT and Another, 340 ITR 144 (Mad.) held That the notices in respect of assessment years 1991-92 and 1992-93 were issued after four years. There was no mention in the recorded reasons that the escapement of chargeable income from tax was due to omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The notices in respect of the assessment years 1991-92 and 1992-93 issued under section 148 read with section 147 of the Act were wholly without jurisdiction and, therefore, they were liable to be quashed. 9.5 Considering the above discussion, in the light of above decisions, it is clear that the assessee has disclosed fully and truly all material facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e process server of the department for the purpose of service upon the assessee. No outward Dak register was produced to show notice dated 30.03.2007 was actually issued by the AO on the same day. No other corroborative evidence was produced to show that the AO issued notice on the same day on 30.03.2007. The ld. CIT(A) examined and considered the issue of service of notice through Inspector in detail and the theory of service by affixture was not found justified. The finding of the ld. CIT(A) on this aspect is mentioned at page 48 of the appellate order as under : As the report of the Inspector has not been found to be verified through an affidavit and also the witness to the service of notice whose name is given in the report has not been found to be traceable to get a confirmation from such witness that the disputed notice was actually served by affixture on 03.04.2007 or not, the claim of the AO about service of the disputed notice has not been found to be substantiated. Under these facts and circumstances and considering that all due procedure as prescribed for service of notice by affixture has not been followed and the witness to affixture has not been found to be trace ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... false, as the report of the Inspector stated that the notice was affixed at 33 Circular Road, Firozabad in the presence of Shri Ram Kumar S/o Shri Dushyant Kumar, 35, Nari Basti Firozabad. The assessee, however, filed affidavit before the AO(PB-71) of Shri Balbir Singh, S/o Shri Jayveer Singh, resident of 35 Nai Basti Firozabad who has affirmed in his affidavit that he is residing at that address and no person by the name of Ram Kumar S/o Shri Dushyant Kumar was residing at his residence. The affidavit could not be rebutted by AO as per finding of ld. CIT(A). Therefore, the affidavit of Shri Balbir Singh also falsifies the report of the Inspector that the notice dated 30.03.2007 was taken by him at the incorrect address of the assessee for the purpose of service. The assessee also filed certificate of Head Post Office, Firozabad (PB-70), in which it is confirmed that the registered letter dated 03.04.2007 in the name of assessee was sent by ACIT, Firozabad which is delivered back on 09.04.2007, as the addressee was not residing at the given address. The ld. counsel for the assessee, therefore, rightly contended that no actual notice was issued on 30.03.2007 because the entire story ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Revenue. In the circumstances, the notices under section 148 in relation to the assessment year 2003-04, having been issued on April 7, 2010 which was clearly beyond the period of six years from the end of the relevant assessment year, were clearly barred by limitation and could not be sustained. The ld. DR, however, relied upon the decision of Hon ble Supreme Court in the case of R.K. Upadhyaya vs. Shanabhai P. Patel, 166 ITR 163 in which there was no dispute that the notice u/s. 147(b) of the IT Act was issued by registered post on 31.03.1970 and was received by the assessee on 03.04.1970. Therefore, it was held that the notice was issued within the period of limitation. We may also note here that the Revenue department also relied upon section 292BB of the IT Act, which is not applicable to the assessment year under appeal, i.e., 2000-2001 because it is applicable from 01.04.2008. Considering the above discussion and in the absence of any corroborative evidence and considering the facts and circumstances noted above, it is clear that no notice u/s. 148 dated 30.03.2007 was actually issued to the assessee on 30.03.2007 i.e. within the period of limitation. The stor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. After some queries, the assessment order was completed. It was found that during the re-assessment proceedings, no objections were raised of any kind with regard to defect or irregularity in the notice. It was, therefore, held that since the assessee participated in the proceedings, therefore, it would constitute a valid service of notice. The ld. counsel for the assessee contended that in the case of assessee neither his counsel nor the assessee appeared at any time before the AO in re-assessment proceedings, because no valid notice was served upon the assessee. The assessee remained exparte u/s. 147 read with section 144 of the IT Act. The assessee never participated in the proceedings before the AO and when the notice u/s. 142(1) dated 07.11.2008 was issued at the correct address of the assessee, the assessee immediately objected to the validity of the service of notice and initiation of proceedings before the AO. The ld. counsel for the assessee, therefore, submitted that the decision relied upon by the ld. CIT(A) is, therefore, not applicable. On consideration of the facts, we agree with the contention of the ld. counsel for the assessee that the above decision of Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee personally; service by affixation was not proper . (iii). Chandra Agencies vs. ITO, 89 ITD 1 (Del.), in which it was held. Since the notices under s. 148 were affixed on three addresses but not on the last known address of the assessee which was available on record and these notices were affixed in the absence of any witness, there was no valid service either on the assessee-firm or on its partner and the assessment completed under s. 144/148 was not valid. (iv). A.K. Kochandi Ors. Vs. Agricultural ITO, 110 ITR 406 (Ker), in which it was held, Assessment Best judgment assessment Validity Notice not served on assessee in accordance with order V, rr. 17, 18 19 etc. Ex parte assessment not valid. (v). Bhagwan Devi Saraogi Ors. Vs. ITO, 118 ITR 908 (Cal.), in which it was held, Reassessment under s. 147 Validity of notice under s. 148-A notice under s. 148 without mentioning the status of assessee is invalid depriving the ITO of his jurisdiction to proceed under s. 147 and the question of validity of notice being pure question of law going to the root of the matter, can be raised at the time of hearing even if not specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no interference needed in the present appeal. (viii). CIT vs. Hotline International (P) Ltd., 296 ITR 333 (Del.), in which it was held, There was no valid service of notice under s. 148 where it was not tendered to assessee or his agent nor refused by them, no effort was made by serving officer to locate the assessee before affixation and notice sent by registered post was not accompanied by acknowledgement due, hence reassessment was bad in law . (ix). CIT vs. Rajesh Kumar Sharma, 311 ITR 235 (Del.), in which it was held as under : Service of notice under s. 148 to an employee of the assessee did not amount to service of notice on the assessee as there is nothing to suggest that the said employee was authorized to accept any notice on behalf of the assessee or was an agent of the assessee; service of notice by speed post was also not valid as the same was sent at an incorrect address and the Revenue has not shown that it was addressed correctly but the receipt prepared by the Postal Department was incomplete. 12.1 Considering the facts of the case in the light of the above decision, it is clear that correct address of the assessee was available to the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, there is no failure on the part of the assessee to disclose all material facts necessary for assessment and that there is no valid service of notice upon the assessee of the notice u/s. 148 of the IT Act in accordance with law. The orders of the authorities below are, therefore, set aside and the proceedings u/s. 148 are quashed. Since the proceedings u/s. 148 have been quashed, therefore, all resultant additions made by the AO would stand deleted on account of unexplained gift. Since the ld. CIT(A) has already deleted the additions on merits and after quashing of the reassessment proceedings, same would be deemed to be deleted. Therefore, the departmental appeals are left with academic discussion only, therefore, we do not propose to adjudicate the departmental appeals on merits. No other point is argued or pressed. 13. In the result, cross objection of the assessee is allowed and departmental appeal is dismissed. Remaining appeals and Cross-objections : 14. The remaining departmental appeals and the cross objections of the assessee are filed against the same common order of the ld. CIT(A), which is subject matter in appeal in the case of Shri Satish Prakash Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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