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Judgment
Anadee Nath Misshra, AM
This appeal has been filed by the assessee against the impugned appellate order dated 23.12.2016 passed by Learned Commissioner of Income Tax (Appeals)-23, New Delhi [in short, "Ld.CIT(A)"] pertaining to Assessment Year 2013-14. The Assessee has raised following grounds of appeal:-
"(1) That the Ld. C.I.T.(A) has erred in sustaining the assessment as 'Best judgement assessment' u/s 144 of the I.T. Act, 1961, as the assessee has not given an opportunity of being heard and a right to question the correctness or the relevancy of the materials on the basis of which the Ld. A.O. proposes to make the best judgment assessment.
That the Ld. C.I.T.(A) has erred in sustaining the baseless addition on account of purchase of Bonds/Debentures of Rs. 20,00,000/- as unexplained investment u/s 68 of the I. T. Act, 1961 as the Ld. A.O. has made the said addition merely on the basis of information, without proving the investment has been made by the assessee.
That the Ld. C.I.T.(A) has erred in sustaining the baseless addition on account of purchase of Equity Shares of Rs. 68,07,900/- as unexplained investment u/s 68 of the I. T. Act, 1961 as the Ld. A.O. has made the said addition merely on the basis of information, without proving the investment has been made by the assessee.
For these and other grounds, which may be urged at the time of the hearing, the appeal may be allowed and justice rendered."
[B]. Vide Assessment Order dated 31.03.2016 passed u/s 153C r.w.s. 144 of the Income Tax Act, 1961 (in short "the Act"). The total income of the assessee was assessed at Rs. 92,07,900/-. In the aforesaid assessment order, additions totaling Rs. 88,07,900/- were made on account of unexplained transactions. The relevant portion of the Assessment Order is reproduced as under:-
"2. Thereafter, the case of the assessee was centralized with the Assessing Officer, Central Circle-3, New Delhi vide order dated 13.07.2015 of the Commissioner of Income Tax, Central-1, New Delhi. Thereafter, notice under section 153C of the Act was issued on 26.08.2015 and duly served. But, on the date fixed no one appeared nor any compliance was made. Thus, no compliance of notice u/s 153C of the Act, was made. Subsequently, notice u/s 142(1) of the Act, was also issued on 12.01.2016 to make compliance on 18.01.2016, but on the said date no compliance was made. Therefore, a show cause notice u/s 271(1)(b) of the Act date 12.02.2016, was issued to show cause on 03.02.2016 as to why penalty u/s 271(1)(b) of the Act, should not be imposed on him for non-compliance of notice u/s 153 of the Act. The assessee neither presented on this date fix nor filed any written submission till date.
The assessee failed to comply with the notices for completion of assessment proceedings. Therefore, penalty u/s 271(1)(b) of the Act, amounting to C 10,000/-, was imposed on the assessee for non compliance. The case is going to be time barred by 31/03/2016. therefore, the undersigned has no option but to complete the assessment as 'best judgment assessment' u/s 153C r.w.s. 144 of the Income Tax Act, 1961, after taking into account all relevant material gathered during the course of search and seizure operation and available on record. The return of income is downloaded from ITD system of department. The assessee filed its return on 21.05.2014 on an income of Rs. 3,99,800/-. The Individual Transaction Statement downloaded from ITD system of department shows following transactions:
S. No.
Summary
Count
Nature of Transaction
Amount
1.
AIR
1
Purchase of bone/debentures from M/s Religare Finvest Ltd.
2000000
2.
CIB
18
Purchase of equity share of various listed companies
6807900
Total
807900
3.1 As the assessee has not furnish any documentary evidence regarding above transactions amounting to Rs. 8807900/-. Therefore, source of investment remains unexplained. Hence, same is added to the total income of the assessee u/s 68 of the Income tax , Act. Penalty proceedings u/s 271 (1) (c) of the I.T. Act, 1961 is being initiated separately. I am satisfied that the assessee has furnished inaccurate particulars and has concealed its correct income, therefore, penalty proceedings u/s 271 (1)(c ) of the I.T Act, is being initiated separately."
[C] The assessee filed an appeal before the learned CIT(A) against the aforesaid assessment order dated 31.03.2016 vide the aforesaid impugned appellate order dated 23.12.2016. The learned CIT(A) confirmed the aforesaid addition of Rs. 88,07,900/- and dismissed the assessee's appeal. The relevant portion of the order of the learned CIT(A) is reproduced as under:
"3.2 In respect of AY 2013-14 he has enclosed copy of the ITR acknowledgement of the return filed on 21.05.2014 manually at ASK and has simply stated as under:
Regarding, the additions on account of purchases of Bong/Debentures of Rs.20,00,000/- and Enquiry Shares of Rs.68,07,900/- as unexplained investment u/s 68, it is again submitted that the Ld. AO has made the said additions on the basis of merely Individual Transaction Statement downloaded from ITD system of department. Here, it is submitted that Individual Transaction Statement provides only information which may be true or false? No any information may be declared of the assessee without further confirming the transactions from the concerned persons and here the Ld. AO has not done anything regarding the same. Here, I would like to refer the decisions in cases of Dhanalakshmi Pictures vs. CIT [1983] 144 ITR 452 (Mad.) and T.C.N Menon vs. ITO [1974] 96 ITR 148(Ker.) in which it was held that 'the assessee will have to be given an opportunity of being heard and a right to question the correctness ITA No.- 1089/Del/2017 Sh. Chakra Dhari Sureka or the relevancy of the materials on the basis of which the ITO proposes to make the best judgment assessment'.
The appellant's AR has argued that the information in ITD system could not have been used by the AO against the appellant "without further confirming the transaction from concerned persons". From the assessment order I find that the AO has observed That there was no compliance on behalf of the assessee in response to notice u/s 153C of the Act dt. 26.08.2015, nor was there any compliance to notice u/s 142(1) of the Act dt. 12.01.2016; the appellant did not comply or respond even to the notice u/s 271(1)(b) of the Act dt. 12.02.2016 and the AO even imposed penalty of Rs.10,000/-, and therefore the order was passed u/s 144 of the Act. At the appellate stage as well, in terms of provisions of S.250(2) of the Act sufficient time was afforded to the appellant to present and argue his case, which the appellant has apparently failed to avail.
3.2.2 Even for this year the AR enclosed copy of the bank account statement of the appellant of a/c no.0191104000201285 with IDBI Bank Ltd., B-4, Ring Road, Lajpat Nagar-3. New Delhi for the period 06.12.2013 to 30.09.2014, but this statement is for re period not relevant to the Previous Year relevant to AY 2013-
While presenting fruitless arguments the appellant's AR has not submitted any explanation of the source of investment of Rs.20,00,000/- in M/s Religare Finvest Ltd. and purchase of equity scares of Rs.68,07,900/-. Considering the meagre income declared in the AYs 2011-12 and 2013-14, with no taxable income in the AYs 2012-13 and even AY 2014-15, the source of such large investment remains unexplained. The addition of Rs.88,07,900/- is therefore sustained and confirmed.
[D] This present appeal in Income Tax Appellate Tribunal ("ITAT, for short) has been filed by the assessee against the aforesaid impugned order dated 23.12.2016 of the learned CIT(A). In the course of appellate proceedings in ITAT, the assessee filed written submissions dated 9.10.2019 which is reproduced as under:
WRITTEN SUBMISSION "Sir, The assessee is an individual and he filed his return of income for the A. Y. 2013- 14 on 21.05.2014, declaring total income at Rs. 3,99,800/-. The ACIT, Central Circle-3, New Delhi [hereinafter shortly referred to as 'A.O.] issued a notice u/s 153C on 26.08.2015, subsequently, he assessed the total income at Rs. 92,07,700/- vide an assessment order u/s 153C r. w. s. 144 dated 31.03.2016. In appeal, the Commissioner of Income-Tax (Appeals) - 23, New Delhi [hereinafter shortly referred to as CIT(A) ] has dismissed the appeal.
GROUNDS AND ARGUMENTS
Ground No. 1 - That the Ld. CIT (A) has erred in sustaining the assessment as 'Best judgment assessment' u/s 144 of the I.T. Act, 1961, as the assessee has not given an opportunity of being heard and a right to question the correctness or the relevancy of the materials on the basis of which the Ld. A.O. proposes to make the best judgment assessment'. Here, It is submitted that the Ld. A.O. has assessed the total income by considering returned income and the Individual Transaction Statement downloaded from ITD system of department only. No opportunity of being heard and a right to question to the correctness or the relevancy of the materials on the basis of which the Ld. A.O. proposes to make the best judgment assessment u/s 144 of the I.T. Act, 1961, has been given to the assessee. I would like to mention here the section 144 which runs as under: Best judgment assessment 144. (1) If any person-
(a) fails to make the return required......................
(b) fails to comply with all the terms.....................
(c) having made a return, fails to comply................
the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment: ..........................................
Thus, an assessment under section 144, opportunity of being heard has to be given to the assessee. An assessment under section 144 - which is a quasi judicial act and which is to be done after forming the best judgment - that the assessee should be given an opportunity of being heard in respect of any material gathered by the A.O. What section 144 requires the A.O. to do in the case of a defaulting assessee is to make an assessment of his total income to the best of the A.O.'s judgment, after taking into account all relevant material which he has gathered. An assessment to the best of judgment is a quasi-judicial process and it has to be based on material gathered. Any quasi-judicial process requires an opportunity of being heard before decision. The decision can be arrived at best, or as correctly as possible, only if the assessee is given an opportunity to say why on the material gathered by the A.O., the income should not be assessed in the manner proposed to be done by him. The material gathered by the A.O. can be used by the A.O. against the assessee only upon having afforded him an opportunity to rebut it. The assessee is entitled to have a second opportunity to show cause why the total income should not be determined in the manner proposed to be done by the A.O.
Here, it is again submitted that the Ld. A.O. has not given any such opportunity of being heard. The provisions of section 144 are mandatory. That being so, an assessment made in violation of the provisions of section 144 is liable to be set aside. Hence, it may be said that the Ld. CIT(A) has erred in sustaining the assessment as 'Best judgment assessment' u/s 144 of the I.T. Act, 1961.
Ground No. 2 - That the Ld. CIT(A) has erred in sustaining the baseless addition on account of purchase of Bonds/Debentures of Rs. 000/- as unexplained investment u/s 68 of the I.T. Act, 1961 as the Ld. A.O. has made the said addition merely on the basis of information, without proving the investment has been made by the assessee'. It is submitted that the Ld. A.O. has made the said addition on account of purchase of Bonds/Debentures of Rs. 20,00,000/- on the basis of merely Individual Transaction Statement downloaded from ITD system of department. Here, it is submitted that Individual Transaction Statement provides only information which may be true or false? No any information may be declared of the assessee without further confirming the transaction from the concerned person, here, M/s Religare Finvest Ltd. and here, the Ld. A.O. has not done anything regarding the same.
It is further submitted that the Ld. A.O. has made the said addition saying 'source of I investment remains unexplained' u/s 68 of the I. T. Act, 1961, which is bad in law at all as the section 68 relates to the cash credit recorded in the books of a/c only. Hence, it may be said that the Ld. CIT(A) has erred in sustaining the baseless addition on account of purchase of Bonds/Debentures of Rs. 20,00,000/- as unexplained investment u/s 68 of the I.T. Act, 1961 as the Ld. A.O. has made the said addition merely on the basis of information, without proving the investment has been made by the assessee'
Ground No. 3 - 'That the Ld. CIT(A) has erred in sustaining the baseless addition on account of purchase of Equity Shares of Rs. 68,07,900/- as unexplained investment u/s 68 of the I.T. Act, 1961 as the Ld. A.O. has made the said addition merely on the basis of information, without proving the investment has been made by the assessee'. It Is submitted that the Ld. A.O. has made the said addition on account of purchase of equity share of various listed companies of Rs. 68,07,900/- on the basis of merely Individual Transaction Statement downloaded from ITD system of department. Here, it is submitted that Individual Transaction Statement provides only information which may be true or false? No any information may be declared of the assessee without further confirming the transaction from the concerned person, here, various listed companies and here, the Ld. A.O. has not done anything regarding the same.
It is further submitted that the Ld. A.O. has made the said addition saying 'source of investment remains unexplained' u/s 68 of the I.T. Act, 1961, which is bad in law at all as the section 68 relates to the cash credit recorded in the books of a/c only. Hence, it may be said that the Ld. CIT(A) has erred in sustaining the baseless addition on account of purchase of Equity Shares of Rs. 68,07,900/- as unexplained investment u/s 68 of the I.T. Act, 1961 as the Ld. A.O. has made the said addition merely on the basis of information, without proving the investment has been made by the assessee. At last, I respectfully pray that the Ld. CIT(A) has erred in sustaining the assessment order and all the additions liable to be deleted. For this act of kindness, I, as duty bound, shall ever pray."
[E] At the time of hearing, Revenue was represented by Ms. Nidhi Srivastava, the learned Commissioner of Income Tax (Departmental Representative ["ld. CIT (DR)", for short]. However, none was present from the assessee's side. In the absence of any representation from the assessee's side at the time of hearing before us, we heard the learned CIT (DR) who relied upon the aforesaid assessment order dated 31.03.2016 and the aforesaid impugned appellate order dated 23.12.2016 of the learned CIT(A). [F] After hearing the learned CIT DR, and after perusal of the materials on record, we find that the ld. CIT(A) has passed a speaking order on merits. Relevant portion of the impugned appellate order of the learned CIT(A) has already been reproduced in foregoing paragraph [C] of this order. We find that the learned CIT(A) has given detailed reasons for his decision on merits in the aforesaid impugned appellate order dated 23.12.2016 of the learned CIT(A). In the written submissions filed by the assessee it has been contended that AO had not given opportunity of being heard. However, this contention lacks credibility on perusal of paragraphs 2 & 3 of the assessment order (already reproduced in foregoing paragraph [B] of this order). On its perusal, we find that the Assessing Officer had provided reasonable opportunity. In the written submissions, the assessee has further contended that the addition of Rs. 20 Lac was made by the Assessing Officer and sustained by the learned CIT(A) merely on the basis of individual transactions statement from ITD system of Income Tax Department. However, on perusal of records, we find that the assessee has brought no material on record to prove that the aforesaid investment amounting to Rs. 20 Lac was not made by the assessee (or made out of explained sources of income/wealth); despite the ITA No.- 1089/Del/2017 Sh. Chakra Dhari Sureka opportunities available to the assessee before Assessing Officer (during assessment proceedings, or during appellate proceedings before the ld. CIT(A) and or now in ITAT). In the written submissions filed by the assessee it has been further contended that the addition of Rs. 68,07,900/- in equity shares has been made by the Assessing Officer and confirmed by the learned CIT(A) merely on the basis of individual transactions statement from ITD system of Income Tax Department. However, once again on perusal of records, we find that assessee brought no material on record to prove that the aforesaid investment amounting to Rs. 68,07,900/-was not made by the assessee (or made out of explained sources of income/wealth) despite the opportunities available to the assessee before Assessing Officer during assessment proceedings, or during appellate proceedings before the ld. CIT(A) or now in ITAT. In view of the foregoing, we find no merit in the written submissions filed by the assessee. We are of the view, after perusal of materials on record including the aforesaid assessment order dated 31.03.2016, the aforesaid impugned appellate order dated 23.12.2016 of the learned CIT(A), and the aforesaid written submissions filed from the assessee's side; that no convincing case has been made to persuade as to take a view different from the view taken by the learned CIT(A), on merit, in the aforesaid impugned appellate order dated 23.12.2016. Therefore, we decline to interfere with the aforesaid impugned appellate order dated 23.12.2016 of the learned CIT(A); and dismiss this appeal filed by the assessee.
[G] Before we part; we explicitly clarify that the assessee will be at liberty to approach ITAT for restoration of the appeal in accordance with Proviso to ITA No.- 1089/Del/2017 Sh. Chakra Dhari Sureka Rule 24 of Income Tax (Appellate Tribunal), Rules, 1963. If the assessee does approach ITAT for restoration of the appeals in ITAT, the matter will be considered in accordance with law having regard to the facts and circumstances.
[H] In the result, appeal filed by Assessee is dismissed.