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TMI Blog2021 (11) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... osited in bank by the assessee and also the claim of interest expenditure as per section 36(1)(iii) of the Act. Accordingly he cancelled the order passed by the AO u/s 143(3) r.w.s 147 of the Act and directed him to pass an order afresh in accordance with law. Aggrieved by the same the assessee has come up in appeal before us raising the following grounds: "1. That the learned PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act while passing the order dated 19-32021. 2. That the learned PCIT has grossly violated the principles of natural justice while passing the order u/s 263 dated 19-3-2021. 3. that the Appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case." 3. We have heard both the parties. The Ld.Counsel for the assessee has before us challenged the assumption of jurisdiction u/s 263 of the Act by the Ld. Pr.CIT, on the ground that the assessment order sought to be revised itself was null and void and no action could be taken in law against such null and void order. Ld.Counsel for the assessee commenced his arguments by contending that the jurisdiction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cash deposit of Rs. 4,17,49,000/- cannot be verified. 7. As the return of income is not appearing on system nor has explained the source thereof, in reply to NMS letter, therefore, source of Cash deposits of Rs. 4,17,49,000/ remains unexplained. In view of the facts as reported above, I have reasons to believe that cash deposits in the banks accounts amounting to Rs. 4,17,49,000/- is the assessee's undisclosed income which has been escaped from assessment in the hands of the assessee for the Assessment Year 2011-12. 8. As per this office record the return of income for the Assessment Year 2011-12 has not been filed, However, considering the acknowledgment of return of income filed by the assessee to be correct and if it is accepted that return of income was filed, even then it make no difference as the same has not been assessed under regular scrutiny assessment u/s 143(3) or 147 of the Income Tax Act, 1961 and as such the provisions of Section 151(2) of the Income Tax Act, 1961 are attracted in this case. 9. As in this case, no assessment was made and to assess the income escaped from assessment which exceeds Rs. One Lac, accordingly the only requirement to initiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that except for the AIR/NMS information of cash deposit in the bank account of the assessee, which by itself did not constitute tangible material for formation of belief of escapement of income, there was no other material with the AO. In this regard he relied upon the decision of the coordinate bench in the case of Smt.Prabha Goyal in ITA No.1139/Chd/2017. 7. Ld.DR on the other hand vehemently argued against the challenge by the assessee to the validity of the original proceedings in the impugned collateral proceedings. His contention being that since the assessee is granted a right to challenge the reopening in the proceedings itself, as per the guidelines laid down by the Apex Court in the case of GKN Driveshafts (India) Limited Vs. ITO, 259 ITR 19 and the assessee having not done so, it could not be allowed to challenge it in collateral proceedings. 8. With regard to the deficiencies pointed out by the Ld.Cousel for the assessee in the reasons recorded the Ld.DR controverted the same contending that the fact noted in the reasons recorded, that the assessee had huge cash deposits which he had failed to explain before the AO, NMS, was sufficient to form belief of escapement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee before us, categorically holding that the validity of original proceedings can be raised in collateral proceedings. It has been so held based on the principle that neither the rule of estoppel nor principle of resjudicata, that neither consent nor waiver, can confer jurisdiction when none exists and that finality or conclusiveness could arise only in respect of orders which are competent orders with jurisdiction and if proceedings are not validly initiated the order would be void order which could never have any finality or conclusiveness. 14. In the case of M/s Westlife Development Ltd.(supra) the ITAT has, after referring to various case laws held that the legality of the proceedings can be agitated in a subsequent proceeding or even in a collateral proceeding or execution proceeding also. The relevant findings of the ITAT are as under: "7. We have heard both the parties on this issue and also gone through the orders passed by the lower authorities as well as the judgments relied upon before us. In our view, we need to decide following issues, before we go into any other issues or merits of the impugned order: 1. Whether the assessee can challenge the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself illegal, then that cannot give rise to valid revision proceedings. Therefore, as per law, the validity of the order passed in the primary (original) proceedings should be allowed to be examined even at the subsequent stages, only for the limited purpose of examining whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Court to pass any decree and such a defect cannot be cured even by consent of parties." 8.3. This judgment was subsequently followed by Hon'ble Supreme Court in the landmark case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193, wherein an issue arose whether a decree can be challenged at the stage of execution and whether a decree which remained uncontested operates as res-judicata qua the parties affected by it. Hon'ble apex court, taking support from aforesaid judgment, observed as under: "In the light of this position in law the question for determination is whether the impugned decree of the Civil Court can be assailed by the appellant in execution. It is already held that it is the Controller under the Act that has exclusive jurisdiction to order ejectment of a tenant from a building in the urban area leased out by the landlord. Thereby the Civil Court inherently lacks jurisdiction to entertain the suit and pass a decree of ejectment. Therefore, though the decree was passed and the jurisdiction of the Court was gone into in issue Nos. 4 and 5 at the ex-parte trial, the decree there-under is a nullity, and does not bind the appellant. Therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on merits only. The Tribunal restored the matter to the Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in permitting the assessee to raise that point which had become final in the first round and in adjudicating upon the same. The plea of the Revenue impressed the Tribunal which took the view that after its earlier order in the first round of proceedings the matter attained finality with regard to the point of jurisdiction whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that many of these judgments were discussed and followed by the co-ordinate bench of the Tribunal in the case of Indian Farmers Fertilizers Co-operative Ltd vs KIT 105 lTD 33 (Del), wherein a similar issue had arisen. In this case, the issue raised before the bench was whether it is open to the assessee, not having appealed against the reassessment order, to set up or canvass its correctness in collateral proceedings taken for rectification thereof u/s 154. The bench minutely analysed law in this regard and applying the principle of 'coram non judice' and following aforesaid judgments of the supreme court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order, then the assessee has to step in and protect its interests and the liberty to question even the validity of the reassessment proceedings ought to be given to it......." (emphasis supplied) 8.8. Similar view was taken in another decision of the Tribunal in the case of Dhiraj Suri vs ACIT 98 lTD 87 (Del). In the said case, appeal was filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have patiently heard at length the arguments of both the parties in this regard and have also carefully perused the contents of the reasons recorded for reopening the case of the assessee placed before us at Paper Book page No.15. We find merit in the contention of Ld.Counsel for the assessee that the reasons recorded do not demonstrate sufficient information in the possession of the AO to lead to the formation of belief of escapement of income. In fact the information available with the AO could not have lead to the formation of belief of escapement of any income at all. 18. As per the reasons recorded by the AO, the belief of escapement of income is based on the information of cash deposits in the bank account of the assessee remaining unexplained on account of no return of income of the assessee available in the system of the department and no explanation regarding the source of the same furnished by the assessee to ITO, Ward-4 (para 7 of the reasons reproduced above). 19. As it turns out the only valid information in the possession of the AO, while recording reasons for escapement of income, was the fact of cash deposits in the bank account of the assessee amounting to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the bank account may lead to a suspicion at best but it definitely cannot lead to belief of escapement of income. The cash deposit may be justified by the facts and figures revealed in the income tax return filed by the assessee. In any case there has to be more information in the possession of the AO to form belief that the cash deposits represent assesses own escaped income. In the present case we find that the AO has no categorical information in his possession either regarding the fact of return having been filed by the assessee nor any other information to the effect that the source of the cash deposits was unexplained. No inquiries were independently conducted by the AO regarding the source of cash deposits, which would have surely assisted in the formation of belief of escapement of income with regard to the same. 22. The reasons recorded therefore do not justify the assumption of jurisdiction by the AO to reopen the case of the assessee u/s 147 of the Act. The order passed u/s 147 of the Act therefore is clearly not a valid order in the eyes of law. 23. The collateral proceedings on the said order, u/s 263 of the Act, are therefore, we agree, not sustainable in law. The ..... 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