Sh. Anjani Kumar Pandey vs Income Tax Officer

“1 . That the learned Natio nal Faceless Appeal C entre (NFAC) has erred bot h in law and on facts i n s ustai ning the additi on o f Rs . 83,35,000/- as agai nst t he declared income of Rs, 47,00,680/- i n an order of ass essment dat ed 23.12.2019 under sec tion 147/143(3) of the Act.

2.

That learned National Fac el ess Appeal C ent re (NFAC) has failed to appreciate that order of ass essment is wit hout jurisdiction.

3.

That the learned Natio nal Faceless Appeal C entre (NFAC) has erred both i n law and on f acts i n upholdi ng the i nitiation of pr oce edi ngs under secti on 147 of t he Act and, c ompl etion of assessment under section 147/143(3 ) of the Act wit ho ut appreciating that the same were without j urisdicti on and hence deserved to be quashed as such.

3.1

That the learned Natio nal Faceless Appeal C entre (NFAC) has failed to appreciat e t hat there was no speci fic rel evant, reliabl e a nd tangi bl e materi al on r eco rd to form a “r eas on to believe” that inc ome of the appellant had escaped assessment and i n view thereof t he proc eedi ngs initiated are illegal, unte nable and therefo re unsustai nable.

3.2

That the learned Natio nal Faceless Appeal C entre (NFAC) has failed t o apprecia te that initia tion of proc eedi ngs was mec hanical and wi thout any a ppl ication of mi nd much l ess independent application of mi nd, theref ore the notice issued u/s 148 of t he Act was an invalid notice and ass umption u/s 147 of the Act w as without jurisdiction.

3.3

That in any case in absence of any valid appro val obtai ned under secti on 151 of the Act, initiatio n of proc eedi ngs u/s 1 47 of the Act and ass essment fra med u/s 147/143(3) o f the Act are i nv alid and deserve t o be quashed as s uc h.

4 That the learned Natio nal Faceless Appeal C entre (NFAC) has also erred both in law and on facts in sustai ni ng an addition of Rs. 83,35,000/-repr esenting alleged cas h deposits i n the bank ac co unt.

4.1

That the learned Natio nal Faceless Appeal C entre (NFAC) failed to appreciat e t hat s ource of cash deposi t is out of sale c onsi de ratio n of immovabl e prop er ty duly declared i n ret urn of i nc ome a nd even accept ed i n t he order of assessme nt, ther efo re uphol di ng the fi ndi ng of learned Assessing offic er that cash deposit was from undisclosed s ourc es is misc onc eived.

4.2

That while confi rmi ng the above additi on, t he lear ned Nati onal Faceless Appeal Centre (NFAC ) has fail ed to appreciate the factual substra tum of the ca se, stat utory provi sions of law a nd as suc h, additi on so confirmed is hi ghly misconceived, tot ally arbitrary, wholly unj ustifi ed and ther efo re, uns ustai nable.

4.3

That the learned Natio nal Faceless Appeal C entre (NFAC) has err ed both i n law and on facts i n recording vari ous adver se inferences whic h ar e co ntrary to the facts on recor d, materi al plac ed on rec ord and, are ot herwise uns ust ainabl e in law and t her efore, additi on so sustai ned is abs ol utely unwa rranted.

5 That the learned Natio nal Faceless Appeal C entre (NFAC) er red bot h i n law and on facts i n uphol ding additi on u/s 68 and 69 of the A ct, on the c ontrary provisions of section i n absenc e of books of accounts are not applicable and pr ovisions of sectio n 69 in vie w of fact of disclosed sourc e of cas h d eposit is also not applicabl e.”

“1 . That t he order of assessm ent under section 147/143(3) of t he Act dat ed 23.12.2019 is illegal , b ad in law and without prej udice as the s ame is passed i n violati on of CBDT i nst rac tion No . 1/2018 [F. No. 225/157/2017-ITA .II) date d 12.02.2 018 and as s uc h the said ass essment order is l iable t o be quashed as suc h.

2.

That the notic e issued on 21.12.2019 u/s 143(2) of the Act is in vi olat ion of CBDT instr uction 01/201 1 dated 31.01.2011, ther efore s uch i nitiation of j urisdic tion is bad i n law a nd t herefore the ass essment is liable to be quashed as s uc h.”

“4.

At the outset , Ld. Couns el for the assessee drew our attention towards t he notice issued by the Assessing Officer u/s . 142(1) of the Act dated 26.8.2019 and poi nt ed out that t his scruti ny ass essment was co nducted via online i n e-proc essi ng fa cili ty available through t he website of the Inc ome Ta x Depar tment. He further drew our at tenti on to the assessment order and particul arly poi nt ed out t hat t he assessment or der dat ed 19.12.2019 has been si gned and issued manually, which is in violati on of CBDT Instruction No. 1 /2018 [F.No. 225/157/2017-ITA .II) dat ed 12.2.2018. Ld. C ounsel for the assess ee furt her stated that exactly si milar issue has bee n dealt by t he Coordi nate B enc h of the Del hi Tribunal in t he case of Out syst ems Singapore Pt e. Ltd. vs. DCIT, Circle Int ernati onal Tax 2(2 )(2), Del hi in I TA NO . 1601/Del/2025 (A Y 2022-23) where in, it has been held as under:-

“7 . We have he ard t he submissions ma de by rival sides and have exami ne d the orders of author iti es bel ow. We have also considered the d ecisi ons on whi ch respective sides have placed reliance i n support of t heir arguments. Before procee di ng to decide meri ts of t he additi on, the l egal issue raised by t he assess ee i n ground of appeal no.3 challe ngi ng validity of t he Fi nal Assessment Order in signi ng the order manually is take n up first for adjudicati on. A perusal of the impugned order reveals that the assessme nt order has been si gned manually by the Ass essi ng Officer. The assessment has been mad e unde r ‘E-Proceedi ngs’. The Board vide Notification No . 01/2018 dated 12.02.2018 has notified that all assessm ent pr oce edi ngs in scruti ny cases are t o be conducted el ectronic all y. The s aid inst ructions are r eproduced herei n below:

“S ECT ION 143, REA D WITH S ECT IONS 142 & 2 (23C), OF TH E INCOME-TAX ACT, 1961 - ASS ESSMENT -

COND UCT OF ASS ESSMEN T PR OCEEDINGS IN SCRUTINY CAS ES EL EC TRONICALLY

INSTRU CTION NO.1/2018 [F.NO.225/157/2017-ITA.II ], DATED 12-2-2018

Sub-secti on (23C ) of Section 2 of the Income-tax Act , 1961 (Act), applicable from 1 -6-2 016, provides that "hearing" i ncl udes c ommunication of data and doc uments t hrough electronic mode. Acc ordi ngly to facilitate conduct of ass essment pr oc eedi ngs electr onically, vide le tter dat ed 23 -6 -2017, in file of ev en number, B oard had iss ued a re vise d format of notice(s ) under s ecti on 143(2 ) of the Act. Par a 3 of these notice (s) pr ovided that assessment proc eedi ngs in case s sel ected for scr utiny wo ul d be conduct ed electr onically i n 'E-Proce edi ng' facility t hrough assessee's account in E-fi ling website of Inc ome-tax Departme nt.

2.

In accor dance with the proc edure outli ned i n revise d 143(2) notice (s) for c onduct of ass essme nt proc eedi ngs elect ronically, it is hereby direc ted that except fo r se arc h related assessments, proc eedi ngs i n ot her pe nding scr uti ny assessment cases shall be conduc ted only through the 'E-Pr oce edi ng' functionality i n ITBA/E-fil ing. H owever, in cases whe re the concer ned ass ess ee obj ects to conduc t of assessment pr oce edi ngs el ectronically thr ough the 'E-Proceedi ng' facility, s uc h cas es , for t he time-being, may be kept on hol d.

3.

Furthe r, consideri ng the situation tha t some of t he stati ons have limited bandwidth, being VSAT st ati ons and stations wi t h limited c apacity where bandwidt h is in the process of bei ng upgraded, it has bee n decided tha t till 31-3-2018, such statio ns, i n acc ordanc e wi th target stipul ated in Central Action Plan for fi nancial ye ar 2017-18, may undertake and compl ete only ten percent scruti ny cases (which a re getti ng bar red by limitation on 31-12-2018) havi ng the potential to effect r ecovery during the curre nt year i ts elf. The list of s uch stati ons shall be speci fied by t he Pr. DG IT(Syst ems ). Accordi ngly, at these s tati ons, till 31-3-2018, the ass essm ent proc eedings i n cases to be compl et ed as per Central Action Plan targe t, may be conduc ted manuall y if e-ass essment is not possibl e. It is rei terat ed tha t at othe r stations covered under pa ra 2 above, subject t o exc eptions mentioned therei n, t he assessments woul d be conducted electronically onl y.

4.

S ome of the important procedural aspects whil e conduc ti ng ass es sme nt pr oce edings thro ugh 'E-Proceedi ng' are as under:

4.1 Enq ui ry before assessment in electronic mode :

For enquiries before ass essme nt i n terms of s ecti on 142(1)(ii) of the Ac t, noti ce shall be issued electr onically and delivered upon t he assessee i n hi s 'E-Filing' account. While fi ling the r espons e electr onically in complianc e with notice under section 142(1)(ii) of the Act, the concerned assessee s hall ve rify it i n the manner pr escrib ed under rul e 14 of Income-t ax Rules, 1962.

4.2 Use of digita l signature by Assessing Officer:

All departmental order s/communications/no tice s being issued to the asses see through the 'e-Procee ding' facility are to be signed digitally by the As sessing Offic er.

4.3

Time fo r c omplianc e: Onl ine s ubmissions may be filed till the o ffice ho urs on t he date stipulated f or complianc e.

4.4

Availability of facility for electr onic submission of doc uments in time barri ng sit uati on or whe re case has bee n fi nally hear d by the Assess ing Officer: The facility for el ectronic submission of docum ents t hrough 'E Proceeding' s hall be aut omatic ally clos ed seven days before the time bar ring dat e. In ot her situati ons , upon completion of pr oceedi ngs, befor e passi ng t he final orde r, concerne d Ass essing Officer, on hi s volition, s hall close t he e-sub mission facili ty aft er menti oni ng i n electr onic order s heet that 'heari ng has bee n concl uded'. Ho wever, if required, i n excepti onal circumstances, the conc erned Asse ssing Officer may enabl e furt her fi ling of submissions electr onically under i ntim ati on to the Range Head in ITBA .

4.5

In assessment p roceedi ngs bei ng carri ed out thr ough the 'E-Pr oceedi ng' facility, a partic ul ar proc eedi ng may take place ma nually in fol lowi ng situati on(s):

i.

where manual book s of acc ount or ori gi nal doc uments have to be exami ned;

ii.

where Ass essing O fficer invo kes provisions of section 131 of the Act or a notice is i ssued f or carryi ng out t hi rd party enquiri es/i nvesti gations ;

iii.

where examination of witness is requi red to be made by the c oncerned assess ee or the De partment;

iv.

where a show-cause no tice c ontem plati ng any adv erse view is issued by the Ass essi ng O fficer and assessee reques ts for pers onal hearing to explai n t he mat ter .

4.6

Mai nt enanc e of 'Record' i n t he context of 'E-Proceedi ng': In cas es being assesse d thr ough 'E-Proceedi ng', from now on, as far as possi bl e, case-rec ords as well as note s hee t of proceedi ngs s hall be mai ntained el ectronically.

5.

This instructi on may be bro ught to the notice of all concer ned for immediate complianc e. ”

8.

A pe rusal of para 4.2 of the a foresaid ins tructions woul d s how that communication of all doc uments incl udi ng orders, notices, etc . issued to the asses s ee through ‘E-Proceeding’ facility are to be signed digitally by t he Ass es sing Offic er. No exception has been provided i n t he said instructi ons for si gni ng t he assessment or ders manually. Duri ng the c ours e of heari ng, the ld. DR sought time to furnish c opy of t he excepti ons, if any. The time so ught by the DR was allowed. Howev er, on t he next date of heari ng no such inst ructions we re furnished and the ld. DR express ed her i nability to l ay ha nds on a ny such instructi ons carvi ng o ut exc eptions. In the abs ence of any excepti ons, all assessme nt orders in ‘E-Proc eedings’ have to be nec essar y si gned di gitally. The i nstruc tions dated 12.02.2018 issued by the Board would apply to all assessments made electronic ally. The ld. DR has place d on r ecord the r easons gi v en by the A O f or signi ng t he order manually. The r elevant excer pts from the same a re reproduced herein under :

“In this regard, i t is submitted that the date of limitatio n for passing the assessment order i n this cas e was 31.01.2025 pursuant to the directi ons of the Hon'ble DRP. T he assessment order for AY 2022-23 was pass ed and sent to CP for final accounting. H owever, CPC had not cl os ed the accounti ng of the same and t he assessment order along with computati on s heet and demand notice had not c ome back fr om the CPC f or bei ng di gitally signed and issued to the assessee grievance had been raised on the TBA Helpdesk for the same. Since the charge of Circle 2(2)(2 ) was bei ng transfe rred with effec t fr om 13.01.2025 on account of the undersi gned proceedi ng on earned l ea ve and si nc e the ne w i nc umbent officer would not be abl e to si gn t he order on a later date, the assessment order in this case was passed and signed manually by the undersi gne d on 10.01.2025 and sent to the ass essee o n the same date.”

9.

Since CBDT Instructions No. 1/2018 (s upra) requires the Assessing Office r to si gn ass essment order digitally where the ass essments ar e compl eted t hrough ‘E-Proc eedi ngs’ facility, the assess ment o rder woul d stand v alid only if it is passed i n acc ordanc e wi th t he CBDT Instructi ons . No exception has bee n provided by the Bo ard to the said condi tio ns.

10.

The Ho n’bl e Supreme Court of India in the case of Cher ukuri Mani v. Chief Secretary, Gover nment of Andhra Prades h (2015) 13 SSC 722 has hel d t hat any deviati on i n the pr ocedure prescri bed by the stat ue renders the action illegal . The Hon’ble Apex C ourt in t he case of C handra Ki shore Jha vs Mahavi r Prasad (1999) 8 SCC 266 held that, if s tat ue pr ovid es f or a thing t o be done i n a partic ular manner, then it has t o be done in that manner and in no other manner . The CB DT has laid down procedure for completi ng ‘E-Proceedi ngs’ in a particular manner, the same ar e bindi ng on the Department. T he AO is thus ma ndatorily requi red to sign the assessment order di gitally where the scruti ny assessments are c onduc ted electroni cal ly. Since, in t he inst ant ca se the assessment has been m ade under ‘E’-Proceedi ngs and ass essment order has been signed manually, the same s uffers fro m incurabl e defect, i f, the ass es sme nt or der has be en served on t he assessee . The reliance placed by t he R ev enue on t he decisi on in the case of Myt heenkunju Muhammed Kunju Kandathil Jewell ers vs. DCIT (supra ) does not s upport the c ause of Revenue as the sam e was pas sed i n pec uliar set of fac ts and henc e, is distinguishable. Thus, t he assessment order is liable to be quashed on this ground alone.”

5.

The afores aid fact s were c onfronte d to Ld. Sr. DR, but he co uld not c ontrovert the above fact situation.

6.

Aft er hea ri ng the rival cont entions and gone thr ough the facts of t he case, we not ed that in terms of the e-proc eedi ngs pr ocedur e laid down by the CB DT, t he Assessi ng Officer is manually re quired to si gn t he assessment o rder digitally wher e sc ruti ny as sessment is conduc ted el ectronically. Si nce i n the i nstant cas e t he assessment has bee n made under e-proce edi ngs facility, howev er, the assessm ent o rder has be en si gned manually, which vi tiates the assessment on this gr ound.

7.

In vi ew of the aforesaid factual matrix and res pectfully, follo wing the afor esai d C oor di nate B ench decisi on i n the c ase of Outsystems Singapo re Pt e. Ltd. vs. DCIT, Circle Internati onal Tax 2(2)(2 ), Del hi in ITA NO . 1601/Del/2025 (AY 2022-23) dated 10.12.2025, we quash the ass essme nt and all ow the additi onal ground raised by the asse ssee.

8.

Since we hav e already quashe d t he assessm ent on the legal gro und, the ot her grounds have beco me academic, hence, need not be adj udi cated.

9.

In the r esult, t he Assessee’s appeal is allowed i n the abo ve t erms.”