Inderpal Bansal vs Deputy Commissioner Of Income Tax, Central Circle-30

PER VIKAS AWASTHY, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-30, New Delhi [in short 'the CIT(A)'] dated 28.02.2023, for Assessment Year 2019-20.

The assessee has made an application for admission of additional grounds of appeal on 17.01.2024. The additional grounds raised by the assessee are as under:-

Time was allowed to the Department for seeking factual report from the AO on additional legal and jurisdictional grounds raised by the assessee/appellant. Since, additional grounds raised by the assessee are legal in nature and goes to the root of validity of the assessment order, the additional grounds raised by the assessee are admitted for adjudication.

Shri W. A. Khan, appearing on behalf of the assessee narrating facts of the case submits that the assessee filed original return of income u/s.139(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 31.10.2019 declaring income of Rs.3,46,940/-. Information was received by the Department from State Administration that cash amounting to Rs.5,65,000/- was found in possession of assessee on 14.03.2019 at Nakur, Tiraha District Saharanpur. The said cash was seized by the Static Surveillance Team. The statement of assessee was recorded on the same date i.e. 14.03.2019. In the said statement the assessee disclosed that cash of Rs.5,65,000/- in his possession belongs to partnership firm M/s. Bansal Enterprises, New Delhi. It was further explained that the assessee was carrying cash to purchase machinery parts (ball bearing) from Railway Road, Saharanpur. Thereafter, the case of assessee for AY 2019-20 was selected for compulsory scrutiny and notice u/s.143(2) of the Act dated 12.02.2021 was issued to the assessee. 5. The ld. Counsel submits that before issuing notice u/s 143(2) of the Act, the Assessing Officer (AO), Shri Pradeep Dhankar, Income Tax Officer (ITO), Ward-46(1), New Delhi, had sent a letter to the Principal Commissioner of Income Tax (PCIT), Delhi-10 dated 15.01.2021 categorically stating that the assessment in the case of the assessee cannot be made by him in light of order u/s.119 of the Act dated 13.08.2020 issued by the Director, ITAT, CBDT and the assessment has to be made by NeAC, Central Charge and international taxation charge. The AO thus proposed to transfer the assessee’s case along with the case of M/s Bansal Enterprises to the AO in the Central Circle, Delhi, in accordance with the provisions of section 127 of the Act. The said communication is at pages 10 to 12 of the paper book. Thereafter, the same AO, i.e., Shri Pradeep Dhankar, ITO, Ward-46(1), New Delhi, issued notice u/s 143(2) of the Act on 12.02.2021. Shortly thereafter, the PCIT, Delhi-10, on the basis of proposal received from said AO, vide order dated 19.02.2021 in proceedings u/s 127 of the Act, transferred the case of the assessee from Ward-46(1), Delhi to Central Circle-30, Delhi. A copy of the order passed u/s 127 of the Act dated 19.02.2021 is at pages 2 to 4 of the paper book. Thereafter, notice u/s 142(1) of the Act dated 20.09.2021 was issued by Shri Raj Kishore, ACIT, Central Circle-30, Delhi and the assessment u/s.143(3) of the Act was completed by the ACIT, Central Circle-30, Delhi. The ld. Counsel, assailing the validity of notice u/s 143(2) of the Act issued by the ITO, Ward 46(1), New Delhi submitted that the assessment order was passed by ACIT, Central Circle-30, Delhi without issuing fresh notice u/s 143(2) of the Act after transfer of jurisdiction u/s 127 of the Act. The ld. Counsel submits that after transfer of jurisdiction, it was incumbent upon the AO to whom jurisdiction of the assessee’s case was transferred to issue fresh notice u/s 143(2) of the Act. The notice u/s.143(2) of the Act issued by the ITO, Ward 46(1), was without jurisdiction, as the ITO, Ward 46(1) had himself admitted that he cannot make the assessment in the case of assessee. 6. On merits of the addition, the ld. Counsel submits that in the statement recorded on 14.03.2019 at the time when the assessee was intercepted by the Surveillance Team, the assessee categorically stated that the cash amount of Rs.5,65,000/- belonged to M/s Bansal Enterprises. The assessee was carrying cash for purchase of machinery parts from Railway Road, Saharanpur. The firm had sufficient cash balance available in the books. During the course of assessment proceedings, the assessee had produced cash book which clearly reflected sufficient cash balance. The AO, without examining the cash book in right perspective, made addition of Rs.5,65,000/- u/s 69A r.w.s. 115BBE of the Act. The ld. Counsel for the assessee made two-fold submissions, i.e., since the mandatory notice u/s 143(2) of the Act has been issued by the AO having no jurisdiction over the assessee, the said notice be held as invalid and the consequent proceedings arising therefrom be quashed. Secondly, the addition of Rs.5,65,000/- made by the AO on wrong appreciation of facts be deleted. 7. Per contra, Shri Dayainder Singh Sidhu, representing the Department, vehemently defending the impugned order and the order of the CIT(A) confirming addition of Rs.5,65,000/- u/s 69A of the Act, submits that the notice u/s 143(2) issued by the AO is valid. The ld. DR submitted that on the date when notice u/s 143(2) of the Act was issued by ITO, Ward-46(1), New Delhi, he was having jurisdiction over the PAN of the assessee. Subsequently, when the case of assessee was transferred from Ward-46(1), New Delhi to Central Circle-30, Delhi consequent to the order passed u/s 127 of the Act, the AO, i.e., ACIT, Central Circle-30, Delhi completed the assessment and passed the assessment order on 24.09.2021. 8. We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also considered the documents, notices, etc., which was referred to by the Counsel for the assessee during the course of his submissions. The legal issue raised by the Counsel for the assessee is that the notice u/s.143(2) of the Act dated 12.02.2021 is invalid as the same has been issued by the AO having no jurisdiction over the assessee.

The assessee has placed on record a copy of proposal dated 15.01.2021 forwarded by Shri Pradeep Dhankar, ITO, Ward 46(1), New Delhi i.e. the AO who has having jurisdiction over the PAN of assessee. The relevant excerpts from the letter addressed to the PCIT are extracted herein below:

A perusal of above communication reveals that the AO has referred to order u/s.119 of the Act dated 13.08.2020 issued by Director, ITAT, CBDT stating that the assessment order shall be passed by NeAC, Central Charge and International Taxation Charge and assessment order passed which are not inconformity with the aforesaid order shall be non-est. Referring to the said order, thus, the AO expressed his inability to complete the assessments in the case of Inderpal Bansal u/s.153A of the Act and M/s. Bansal Enterprises u/s.153C of the Act. The AO has requested for transferring jurisdiction of the assessee’s case to the AO of Central Charge under the provisions of section 127 of the Act. Despite, the fact that the AO has expressed his lack of jurisdiction in making the assessment. The AO still issued statutory notice u/s.143(2) of the Act on 12.02.2021 to the assessee. The initiation of scrutiny assessment proceedings starts with issuance of notice u/s.143(2) of the Act. Once, the AO has expressed his lack of jurisdiction in make the assessment, he has no jurisdiction to even issue notice u/s.143(2) of the Act. The fact that the AO had no jurisdiction to make assessment over the assessee is further established when on the proposal from the AO to transfer the jurisdiction of the case of the assessee and M/s. Bansal Enterprises was transferred by the PCIT vide order dated 19.02.2021 u/s.127 of the Act to the Central Circle-30, Delhi. Thus, from the fact of the case it emerges that the notice issued by the AO u/s.143(2) of the Act was without jurisdiction. 10. Here it would be relevant to refer to the provisions of section 124(3) of the Act. The relevant extract of the same is reproduced here in below:-

A bare perusal of the aforesaid provisions makes it clear that the jurisdictional defect in issuance of notice u/s.143(2) of the Act has to be brought to the notice of the AO within a period of one month from the date on which he was served with the notice or after the completion of the assessment, whichever is earlier. In the instant case, we find that this jurisdictional defect was neither brought to the notice of AO during assessment proceedings or even after the completion of assessment. The assessee has raised this jurisdictional issue for the first time before the Tribunal by way of additional ground of appeal. In light of unambiguous provisions of section 124(3)(a) of the Act, the additional ground raised by the assessee challenging validity of the reopening of assessment is rejected.

On merits of the addition, the ld. Counsel for the assessee has pointed that the cash seized i.e. Rs.5,65,000/- was available in the books of the firm. However, on perusal of the cash book available on record it emanates that the last entry in the cash book is dated 07.03.2019 and the closing balance on the said date is Rs.8,38,937.67/-. Undoubtedly, on the said date there was sufficient cash balance. However, the cash was seized on 14.03.2019, i.e. a week after the last entry on cash book. There were no entries in the cash book for the intervening period. Thus, the cash book does not reflect that on 14.03.2019 the firm had sufficient balance and/or Rs.5,65,000/- was withdrawn by the assessee from the cash available with the firm for purchase of machinery parts. Therefore, we find no error in findings the of CIT(A) in upholding the addition on merits.

In the result, appeal of the assessee is dismissed.