TMI Blog2021 (11) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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. 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. Collateral proceedings on the said order, u/s 263 of the Act, are therefore, we agree, not sustainable in law. The order passed by the Ld.PCIT u/s 263 of the Act is accordingly set aside. - Decided in favour of assessee. - ITA No.22/Chd/2021 - - - Dated:- 2-11-2021 - Smt.Annapurna Gupta, Accountant Member And Shri R.L. Negi, Judicial Member For the Assessee : Shri Rohit Goel, CA For the Revenue : Shri Sandeep Dahiya, CIT ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: The above appeal has been preferred by the assessee against the order of the Principal Commissioner of Income Tax, Panchkula (in short the Ld.Pr.CIT) dated 19.03.2021 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons recorded for escapement of income were based on incorrect facts and demonstrated that even the AO was unaware of the basic facts and showed non-application of mind by the AO while recording the reasons. That the satisfaction of formation of belief of escapement of income recorded by the AO was not based on any tangible material. The reasons recorded for reopening the case of the assessee, copy of which was placed before us at Paper Book page Nos.15 to 17, was referred to while making the aforesaid contentions. The contents of the reason are as under: 1. From perusal of details available in ITS, it is seen that return of income for the Assessment Year 2011-12 has not been filed by the assessee. 2. As per information available in NMS, Cycle-2, the assessee has deposited cash of ₹ 10,00,000/- or in more in the Saving Bank Accounts With Punjab National Bank And HDFC Bank during the financial year 2010-11 relevant to the Assessment Year 2011-12. 3. On verification from ITS, it is seen that the assessee has made huge cash deposits in his. bank accounts during the financial year 2010-11 as per details hereunder: - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 of the Income Tax Act, 1961 has been obtained separately from the Principal Commissioner of Income Tax as.(per the provisions of Section 151 of the Income Tax Act, 1961. 5. The contention of the Ld.Counsel for the assessee vis- vis the reason being based on incorrect facts or non application of mind was with regard to his finding at para-1 of the reasons that no return had been filed by the assessee, while at para-4 he recorded the return having been filed and subsequently at para-8 noted that though the return of income had not been filed by the assessee as per the office record, however, even considering the acknowledgement of return filed being true, the same having not been assessed, the provisions of section 151(2) of the Act come into picture. The Ld.Counsel for the assessee pointed out that the fact of the matter is that the assessee had filed return of income while the AO had based his premise of escapement of income on the incorrect fact that no return had been filed by the assessee and, therefore, the huge cash deposits amounting to ₹ 4.17 crores in the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment System, which was a system devised for tracking and assessing cases where no returns were filed but there was adverse information from AIR etc regarding such persons. That a separate ward was created for such cases, where based on information in possession of the department, the persons were required to explain sources of investments/income/cash deposits. It was stated that the jurisdiction lay only with regard to non filer assesses. Ld.Counsel for the assessee stated that in the present case the assessee had filed return of income, which was duly intimated to the AO, NMS, who had uploaded the information and which finds mention in the reasons recorded also at para Ld.Counsel contended that since the assessee was not a non filer therefore he was not required to offer any explanation to the AO, NMS. Therefore, he contended that the AO of the assessee, while recording reasons, could not have derived any strength or benefit from the non furnishing of any explanation by the assessee to the AO, NMS. That in any case the satisfaction of escapement of income has to be of the AO of the assessee and not a borrowed satisfaction. 10. Ld.DR agreed with the factual explanation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order? In our considered view, since these issues are jurisdictional issues and go to the root of the matter, therefore before dealing with any other issue, we shall first deal with all above three issues one by one, as under: 8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263: The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as 'primary proceedings'. These are, in effect, basic / foundational proceedings and akin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the collateral proceedings. If it is not so allowed, then, it may so happen that though order passed in the original proceedings was illegal and thus order passed in the subsequent proceedings in turn would also be illegal, but in absence of a remedy to contest the same, it may give rise to an 'enforceable' tax liability without authority of law. Therefore, the Courts have taken this view that jurisdictional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs. 8.2. In a matter that came up before Hon'ble Supreme Court in the case of Kiran Singh Ors. v. Chaman Paswan Ors., [1955] 1 5CR 117 the facts were that the appellant in that case had undervalued the suit at ₹ 2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Registry raised the objection as to valuation und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as res judicata and the appellant cannot raise the same point once again at the execution. 8.4. Similar view has been taken by Hon'ble Supreme Court by following aforesaid judgments recently in the case of Indian Bank vs Manual Govindji Khona reported in 2015 (3) SCC 712. Further, similar view was emphasized by Hon'ble Bombay High Court (GOA Bench) in the case of Mavany Brothers vs CIT (Tax Appeal No 8 of 2007) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution. 8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh Ors. v. Chaman Paswan Ors, supra were reiterated by the Apex Court in the cases of Superintendent of Taxes vs Onkarmal Nathmal Trust (AIR 1975 SC 2065) and Dasa Muni Reddy v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or reassess a person can n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer was only the question whether the addition was justified on merits and the point regarding the jurisdictional aspect was not open before the Assessing Officer. According to the Tribunal, the assessee having raised the point in the first round and having given it up could not revive it in the second round of proceedings where the issue was limited to the merits of the additions. In this view, the Tribunal accepted the Revenues plea. The assessee thereafter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was under challenge. According to Hon'ble Gujarat High Court, the rule of res judicata cannot be invoked where the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee challenged the validity of block assessment order which had determined the tax liability of the assessee on the basis of which penalty was levied subsequently. The revenue objected with respect to the ground of the assessee raising jurisdictional issues of assessment proceedings in the appeal against the penalty order. After analysing the legal position, as clarified by Hon'ble Gujrat High Court in the case of P.V. Doshi, supra and Hon'ble Bombay High Court in the case of Jainaravan Babulal vs CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty. 8.9. We also derive support from another judgement of Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate re- assessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in the income tax systems(ITS) has no implications and carries no weight for the formation of opinion that the source of cash deposits has remained unexplained since it does not mean and is not equivalent to the fact of no return having been filed by the assessee. On the contrary, we find, that the fact in the present case is that return was filed by the assessee which fact is noted by the AO also in his reason mentioning the recording of this fact by the ITO, Ward-4. The AO, in truth, was clueless and uncertain of the fact whether return of income was filed by the assessee or not. 20. Further, even the assessee not responding to inquiries conducted by the AO, NMS, i.e. ITO Ward-4 regarding the cash deposits, we find, is of no relevance for forming opinion of the cash deposits being unexplained, since as rightly pointed out by the Ld.Counsel for the assessee, it is the AO of the assessee whose satisfaction is crucial for reopening and it cannot be a borrowed satisfaction. Also, as pointed out to us by the Ld.Counsel for the assessee and not controverted by the DR, the jurisdiction of the AO, NMS, lay with regard to non-filer assessees only, while the assessee had d ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
