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Judgment
PER YOGESH KUMAR, U.S. JM:
The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 26/11/2024for the Assessment Year 2011-12.
Brief facts as mentioned in the order of the Ld. CIT(A) are as under:-
“3.The brief facts of the case are that the appellant has not filed her Income Tax return for the AY. 2011-12. As per information available with the department, the appellant had made cash deposit of Rs. 20,94,355/- in her bank account maintained with Central Bank of India during the F.Y. 2010-11 relevant to the AY. 2011-12.
3.1In view of the above, the assessing officer had a reason to believe that the Income otherwise chargeable to tax has escaped assessment. Accordingly, with the sanction of competent authority, notice u/s. 148 of the Act dated 26.03.2018 was issued through speed post to the appellant. In response, the appellant had not filed her Income Tax Return for the AY. 2011-12. Subsequently, notices u/s. 142(1) dated 01.08.2018, 12.09.2018 and 03.10.2018 were issued through speed post to the appellant along with questionnaire, specifically to furnish the sources of income and the said cash deposit. In response, the appellant had not responded to any of the notices. In the interest of natural justice, a show cause notice was also issued through speed post on 22.10.2018. However, the appellant had not replied. On account of the failure of the appellant to respond to various notices issued from time to time, the assessing officer was left with no option but to complete the case under section 144 to the best of his judgment.
3.2The AO has given a finding that the appellant remained non-responsive and failed to furnish sources of income or nature of business being carried out during the previous year relevant to AY 2011-12. Accordingly, in the absence of the satisfactory explanations, business income was estimated at Rs. 5,00,000/-.
3.3Further, in the absence of the satisfactory explanations and the fact that the appellant failed to furnish any documents regarding source of the cash deposit, the AO treated the whole cash deposit amount to the tune of Rs. 20,94,355 as 'unexplained credits' and added to the total income.”
Aggrieved by the assessment order dated 24/12/2018, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 26/11/2024, remanded the matter to the file of the A.O. by exercising the power conferred u/s 251(1)(a) of the Income Tax Act, 1961 ('Act' for short). As against the order of the Ld. CIT(A), Assessee preferred the captioned Appeal.
At the outset, the Ld. Counsel for the Assessee submitted that Ld. CIT(A) ought to have decided the legal issue/ legal ground raised by the Assessee andthe Ld. CIT(A) committed error in remanding the matter to the file of the A.O. without deciding the same. the Assessee has raised Ground No. 1 before the Ld. CIT(A) contending that,‘the assumption of jurisdiction under Section 147 of the Act is illegal’, therefore, the Ld. Assessee's Representative contended that the Ld. CIT(A) has committed error in remanding the matter without deciding the legal issue raised before him.
The Ld. Counsel further submitted that the Ld. A.O. had mentioned ‘Section 147(a)’ in Column NO. 6 of the Performa and submitted that the Section 147(a) of the Act used to be in the statute bookonly till 31.03.1988, thereafter, Section 147(a) was omitted. Further submitted that Section 147(a) was not in existent at the time when the Ld. A.O. had prepared the ‘Proforma’ and mentioning of non-existent provision is classic example of non-application of mind, not only on the part of the Learned A.O., it is also a classic example of non-application of mind on the part of the Addl/JCIT concerned as well as on the part of Learned Pr. CIT concerned. The Ld. Counsel relied on various judicial precedents and submitted that, the A.O. has proceeded to initiate the proceedings under Section 147 of the Act without application of mind, thus sought for setting aside the assessment order and the order of the Ld. CIT(A).
Per contra, the Ld. Departmental Representative submitted that the Assessee has not participated in the assessment proceedings, therefore, the Ld. CIT(A) by exercising the power conferred under Section 251(1)(a) of the Act, rightly remanded the issue to the file of the A.O. for framing fresh assessment, which cannot be found fault with. The Ld. Departmental Representative further submitted that mentioning of the provision 147(a) of the Act in Column 6 of the ‘Form for recording reasons for initiating proceedings under Section 147 for obtaining the Approval of Pr. Commissioner of Income Tax’was at the most is a typographical error, which cannot be resulting in terming the entire assessment proceedings as erroneous. Thus, sought for dismissal of the Appeal.
We have heard both the parties and perused the material available on record. The Ld. CIT(A) vide order impugned, remanded the matter to the file of the A.O. for de-novo assessment considering the fact that the Assessee has not participated in the assessment proceedings. However, while remanding the matter to the A.O., the Ld. CIT(A) has not decided the legal issues/legal ground raised by the Assessee regarding assumption of jurisdiction under Section 147 of the Act. In our opinion, when a legal ground is raised before the Ld. CIT(A), the Ld. CIT(A) is duty bound to decide the legal ground first irrespective of the fact that the Assessee has participated in assessment proceedings or not, therefore, we find no justification to sustain approach of the Ld. CIT(A) in remanding the matter to the file of the A.O.
In the present case, it is the specific case of the Assessee that while recording satisfaction, A.O. has mentioned the ‘Section 147(a)’ in Column No. 6, however, the said Section itself is ceased to exist from 31/03/1988, which shows the non-application of mind of the A.O. For the sake of ready reference, Form for recording reason initiating proceedings under Section 147 of the Act for obtaining the approval of Principal Commissioner of Income Tax is reproduced as under:-
We have gone through the Performa of satisfaction;the Ld. A.O. has mentioned a non-existing provision i.e. Section 147(a) in Column 6. In our considered opinion, the action of the A.O. mentioning the provision which is not in exist is a clear non application of mind on the part of Additional JCIT as well as on the part of Ld. Principal CIT and the authorities have recorded the reasons/satisfaction without verifying the details, which is nothing but a non-application of mind.
In an identical case, the Co-ordinate Bench of the Tribunal in ITA No. 6862/Del/2018 in the case of Omkar Developers Ltd. Vs. ITO vide order dated 11/05/2021, quashed the reassessment proceedings in following manners: -
“10.2Further in Column No. 7 of the proforma, the section for invoking reassessment has been recorded as 147(b) of the Act. During the relevant period, section 147(b) was no longer in existence. This shows that the Ld. AO has filed the Proforma in mechanically manner and Ld. CIT has also approved the same mechanically. In the case of Madhu Apartment Private Limited vs. ITO, ITA.Nos.3869 & 3870/Del./2018 wherein the Tribunal, Delhi Bench, vide order dated 01/02/2021 held as under:
“7.After considering the rival submissions, we are of the view that the issue is covered by the Order of ITAT, Delhi G-Bench, Delhi in the case of VRC Township Pvt. Ltd., Delhi (supra) in which reopening of the assessment in identical circumstances was held to be bad in law and sanction accorded by the Sanctioning Authority was also found invalid, therefore, reopening of the assessment was quashed. In the present case, the Learned Counsel for the Assessee has pointed-out that assessee has raised this issue before the Ld. CIT(A), but, he has rejected the submissions of the assessee holding that Section 147(b) as mentioned in the reason and Format is a typographical human error which is curable under section 292B of the I.T. Act, 1961. This issue is also considered in the Order of VRC Township Pvt. Ltd., (supra) following the decision of Hon’ble Bombay High Court in the case of Kalpana Shantilal Haria vs. ACIT [2017] 100 CCH 165 (Bom.). Following the same reasons for decision, we set aside the Orders of the authorities below and quash the reopening of the assessment in both the assessment years under appeals. All additions stand deleted. Accordingly, appeals of the Assessee are allowed.”
10.3In the instant case before us, also the Learned DR has argued that the mistake of noting section under section 147(b) of the Act for reassessment proceeding is a clerical mistake, however, the Tribunal in the above decision has rejected the said contention and quashed reassessment proceeding on the ground of non-application of mind while granting approval for reopening of the assessment under section 151 of the Act.
10.4Respectfully, following the decision of the Hon’ble Delhi High Court in the case of NC Cable Ltd (supra) and decision of the Tribunal in the case of Madhu Apartment Pvt. Ltd (supra), we quash the reassessment proceeding in the case of the assessee.
10.5Since we have quashed the reassessment proceeding while adjudicating ground No.1 of the appeal of the assessee, no additions made by the Assessing Officer could be sustained. As far as other grounds of appeal of the assessee challenging validity of reassessment proceeding are concerned, same are rendered merely academic in nature and, therefore, we are not adjudicating upon those grounds. As far as grounds of the parties challenging merit of the addition are concerned, same are rendered in-fructuous in view of the reassessment proceeding already quashed by us.”
Further the Co-ordinate Bench of the Tribunal in ITA No. 2352/Del/2024 vide order dated 09/10/2024 in the case of Montreaux Resorts Pvt. Ltd. Vs., ITO, also taken an identical view in following manners:-
“10.We have perused the reasons recorded under Section 148(2) of the Act and other material to invoke jurisdiction under Section 147 of the Act. The reasons recorded do not suggest at all that in pursuance of receipt information received from DDIT (Investigation), Shimla, whether the Assessing Officer had independently applied its mind to the information received or conducted some enquiry into the matter for the purpose of coming to conclusion that income assessable to tax had escaped assessment. It is further noticed that the AO while alleging escapement noted that the difference of Rs.15 lakhs in question was paid through “accounted income/cash”. Such observation itself contradicts the allegation towards escapement of income. The Addl. CIT while granting approval has simply observed that ‘it is a fit case for issue of notice under Section 148 of the Act’ disregarding such observations of the AO in the reasons recorded. Furthermore, the approval has been proposed by the AO with reference to Section 147(b) of the Act which provision is nonexistent for the purposes of proceedings under Section 147 of the Act. The Addl. CIT further granted approval ignoring this vital aspect as well. At this juncture, a reference may be made to the judgment delivered by the Hon’ble Bombay High Court in the case of Kalpana Shantilal Haria vs. ACIT WP(L) No.3063 of 2017 dated 22.12.2017 wherein it was held that approval of action with reference to Section 147(b) of the Act is marred by non-application of mind. The Co-ordinate Bench in the case of Bhaijee Commodities (P.) Ltd. vs. ACIT (2023) 154 Taxmann.com 292 (Del) has observed that approval based on nonexistent provision of Section 147(b) of the Act is not sustainable in law. Besides, no minimal reasons were given regarding his satisfaction for such approval. The approval given is clearly mechanical, perfunctory and routine. Thus, neither the reasons recorded under Section 148 of the Act justify the allegation towards escapement of income nor the approval given by the Addl. CIT stands the test of judicial scrutiny. The transaction of land parcel is also found to be between Mr. Khayali Ram and Rajeev and not assessee. Thus, looking from any angle, the jurisdiction assumed under Section 147 of the Act is not sustainable in law.
11.For the reasons narrated above, it is evident that reasons recorded for exercising the jurisdiction is plagued with several defects of critical nature. Such defects are incurable under Section 292B of the Act. On the face of such lack of jurisdiction under Section 147 of the Act, the reassessment proceedings itself is bad in law.”
Considering the fact that the A.O. has proceeded under Section 147 of the Act without due application of mind, in our considered opinion, the initiation of proceedings is invalid and erroneous. By following the orders of the Tribunal in the case of Omkar Developers Ltd.(supra)and Montreaux Resorts Pvt. Ltd.(supra), we quash the assessment order and order of the Ld. CIT(A).
In the result, Appeal of the Assessee is allowed.