TaxTMI 
TaxTMI 
2021 (11) TMI 404
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....out jurisdiction and being void ab-initio, the same kindly be quashed. Consequently the impugned assessment framed u/s 144/148 dated 11.02.2014 also kindly be quashed. 4. The ld. CIT(A) erred in law as well as on the facts of the case in confirming the addition of Rs. 21,75,286/- on account of commission earned in the hands of the assessee as against her father despite the facts that she was minor and was studying in Class XII at Sant Anslam School, Mansarover, Jaipur at the relevant point of time. The addition so made and confirmed by the ld. CIT(A) is totally contrary to the provisions of law and facts on the record and hence the same kindly be deleted in full." 2. Briefly stated, facts of the case are that basis receipt of certain information by the Assessing officer, the case of the assessee was reopened by issuing notice u/s 148. In response to the notice, it was submitted by the assessee that she was minor during the previous year relevant to impugned assessment year and it was requested to drop the reassessment proceedings initiated against her. It is also noted that no return of income was filed by the assessee in response to notice u/s 148. Thereafter, notices were issu....
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....e assessee has been falling under the jurisdiction of ITO Ward 6(3), Jaipur. Same is evident from the PAN jurisdiction appearing on income tax portal. An image of the same is placed hereunder for your kind perusal: As jurisdiction of the assessee was falling under ITO Ward 6(3), therefore Notice u/s 148 being the jurisdictional notice, was required to be issued by the Jurisdictional Assessing Officer, however, in the instant case, notice u/s 148 has been issued by ITO Ward 6(2) (PBP-1), after recording the reasons (PBP 2-3). 1.2 In the assessment order, at Page-1, Para-1, assessing officer has made the incorrect assumption of the fact that "assessment was reopened by issuing notice u/s 148 of the Income Tax after duly recording reasons by ITO W 6(3)", whereas from the perusal of Notice u/s 148 (PBP-1) and reasons recorded (PBP 2-3), it is evident that Notice has been issued by ITO Ward 6(2) and reasons have also been recorded by ITO Ward 6(2). Moreover, we made the inspection of assessment records after making the official request before Hon'ble ITAT during the course of hearing on 04.03.2021, and in the entire assessment records there is no such Notice u/s 148 or reasons recor....
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....ooking into the correct facts of the case. In support of our contention we rely upon following case laws: * Hon'ble Jurisdictional ITAT in the case of Smt. Meena Baldua Vs ITO in ITA No.872/JP/2018 vide order dated 08.03.2019 by holding as under: (Case Law#4) "Hence, we hold that the reasons recorded by the AO based on incorrect fact is not sustainable in law and liable to be quashed. Since, we quashed the reopening being invalid therefore, we do not propose to go into ground no. 2 of the assessee's appeal on the merits of the addition." * Ram Mohan Rawat Vs ITO in ITA No.1014/JPR/2018 (Jaipur Trib.) vide order dated 08.03.2019 (Case Law#5) by holding as under: "Thus making the wrong statement in the reasons recorded and ignoring the relevant and correct facts available on record established that the AO has not applied his independent mind while forming the opinion. The Chandigarh Bench of the Tribunal in case of Baba Kartar Singh Dukki Educational Trust vs. ITO (supra) has also considered an identical issue and held that the AO proceeded for reopening of the assessment for non-existent and factually incorrect reasons and has not applied his mind. The Tribunal has concluded....
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....inion the basis of reopening itself is based on wrong facts therefore, the same cannot be upheld. I accordingly set aside the notice u/s 148 of the Act the reassessment based on such notice deserves to be quashed. Since the assessment itself has been quashed the other ad-hoc disallowance stand deleted. " 3. Non Application of Mind by AO at the time of recording of Reasons: 3.1 It is important to note that in the instant case the reasons were recorded by the AO on 17.03.2017 on the basis of Individual Transaction Statement (ITS) showing the details of Form 26AS. In which certain entries were appearing showing total payment of Rs. 21,60,840/- and TDS deducted of Rs. 2,17,807/- and on the basis of said information and non filing of return, it was concluded that the income has escaped the assessment. 3.2 After recording the reasons by recording a categorical finding that assessee has received gross receipts amounting to Rs. 21,60,840/- a notice u/s 133(6) dated 22.08.2017 (PBP-17) was issued to Punjab National Bank to obtain copies of bank statements of the account in which such alleged receipts were credited. 3.3 It view of the these facts, it emerges that the AO was having inform....
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.... and factually incorrect. A bare perusal of the reasons recorded reveal that same are completely vague. Instead of recording a clear finding, merely gross receipts has been mentioned without giving any specific as to nature of alleged income or the bank account in which alleged receipts have been received by the assessee. 3.7 As mentioned above, after recording the reasons, the assessing officer has subsequently written a letter u/s 133(6) to Punjab National Ban to obtain the copy of Bank Statments. Given that, on the basis of this transaction, AO formed a reason of escapement in the hands of the assessee, therefore, it was essential on his part to at least examine the correct facts of the transaction beforehand. There is no dispute that the AO can rely upon the information received but at the same time, where he is assuming jurisdiction u/s 147, he is required to carry out further examination to make a establish formation of belief that income has escaped, whereas, nothing of this sort was done. 3.8 The Hon'ble Delhi High Court recently in the case of South Yarra Holdings vs. ITO, vide Writ Petition No.3398 of 2018, order dated 1st March, 2019, at para 7 (Case Law#6) of the ....
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....s filed its return of income u/s 139(1) was very much in the knowledge of the Assessing officer and the latter could have verified the transactions with the reported transactions in the financial statements and could have asked for more information to establish the necessary nexus, however nothing of that sort has been done by the Assessing officer and he has merely gone by the report of DIT, Investigation Wing. It is true that the Assessing officer can rely on the report of DIT, Investigation Wing but at the same time, where he is assuming jurisdiction u/s 147, he is required to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment and in absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside. Our viewis fortified by the decision of the Hon'ble Delhi High Court in case of Meenakshi Overseas Pvt. Ltd. (supra) wherein it was held as under:- "........." In light of above discussions and in the entirety of facts and circumstances of the case, the assumption of jurisdiction and initiation of the proce....
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....section 148, reopening of 8 assessment was invalid - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [In favour of assessee] Search and Seizure-Procedure for black Assessment- Search was conducted at residential and business premises of Assessee and notice for block assessment u/s. 158-BC was issued- For block period, returns were filed that were processed u/s. 143 (1)- However, notice u/s. 148 was issued by AO, on basis of certain reasons recorded-Assessee objected to same before AO, that was rejected and assessment was completed u/ss. 143(3) and CO No.57/Del/2012 147- CIT(A) found that reason recorded by Joint Commissioner of Income Tax, for according sanction, was merely recording 'I am Satisfied'- Action for sanction was alleged to be without application of mind and to be done in mechanical manner- Held, while according sanction, Joint Commissioner, Income Tax only recorded "Yes, I am satisfied"- Mechanical way of recording satisfaction by Joint Commissioner, that accorded sanction for issuing notice u/s. 147, was clearly 9 unsustainable-On such* consideration, both Appellate authorities interfered into matter No error was c....
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....39;s appeal dismissed." * The case of assessee is squarely covered by the decision of Hon'ble Jaipur ITAT in the case of M/s Angel Infrastructure Pvt Ltd Vs DCIT in ITA No.464/JP/2018 vide order dated 06.12.2018 (Case Law#8) * The case of assessee is squarely covered by the decision of Hon'ble ITAT, Delhi Bench in the case of Blue Chip Developers P Ltd Vs ITO in ITA No.1061/Del/2019 vide order dated 02.12.2019 wherein it was held as udner: "4.2 Since in the present case the approving authority has given approval to the reopening of assessment in a mechanical manner without due application of mind by only mentioning in Column No. 12 "YES", in the Reasons for Initiating Proceedings u/s. 147 and For obtaining the Approval of the Addl. Commissioner of Income Tax, Delhi-2, New Delhi, a copy of which is placed at page no. 103 of the Paper Book No. 2, and therefore, the legal issue in dispute is squarely covered by the aforesaid finding of the Tribunal, hence, respectfully following the aforesaid precedent i.e. ITAT, SMC, Bench, New Delhi order dated 16.10.2019 in the case of Dharmender Kumar vs. ITO decided in ITA No. 2728/Del/2018 (AY 2008-09), as relied by the Ld. Counsel for the....
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.... statement of Ram Devi; copy of PAN card of Rama Devi; confirmation from Shyam Sunder; bank statement of Shyam Sunder; copy of PAN card of Shyam Sunder; confirmation from Virender Kumar; confirmation from Eshwar Dutt; Confirmation from Dayanand Sharma; jewellery sale bill to assessee; jewellery sale bill to Rohtash (2 in no's); jewellery sale bill to Kumud; sub. To CIT dated 18.8.17; RR dated 27.10.17; Sub. To CIT(A) dated 7.12.17 (Rejoinder to RR) and Sub. To CIT(A) dated 15.2.2018 and especially the page no. 2- 3 of the Paper Book which is a copy of Performa for recording the reasons for initiating proceedings u/s. 148 and for obtaining approval of Addl. CIT, Range-65, New Delhi in which Addl. CIT, Range-65, New Delhi has granted the approval in a mechanical manner for issuing notice u/s. 148 of the Income Tax Act, 1961. It is noted that approval u/s. 151 of the Act was granted by the Addl. CIT, Range-65, New Delhi vide Column No. 11 by mentioning as under:-"Yes, I am satisfied on the reasons recorded by AO that it is a fit case for issue of notice u/s. 148 of the I.T. Act, 1961."5.1 After perusing the aforesaid remarks of the Addl. CIT, Range-65, New Delhi, I find that the appro....
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....tering into any kind of agreement, therefore there was no such agency arrangement between the appellant and Eve Jewels Limited and in the absence of any agency agreement, treating the alleged commission income in the hands of assessee is unreasonable and contrary to the law. (iii) Under Clause (a) of proviso to section 64(1A), the manual work done by minor has been provided to be assessed in his/her own hand. Here, the purposive interpretation to the word manual work used in the said proviso needs to be given. Here the manual work denotes the activities in the nature of painting or sculpture making or any other work involving manual efforts by the minor. In the instant case, the nature of income is commission, which is purely a business receipt, requiring the person to work as an agent of the principal. Thus, certainly the same does not fall under the category of any manual work done by the appellant and the commission income does not come under the ambit of Clause (a) of Proviso to section 64(1A). (iv) Ld. AO as well CIT(A) has stressed upon the fact that TDS has been deducted on the income on which tax was deducted at source by Eve Miracle Jewels Limited u/s 194H and the asse....
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....f commission receipts of Rs. 21,60,840/- (as alleged in reasons recorded), the actual receipts of appellant are Rs. 14,28,318/- only (as evident from copy of bank statements submitted by assesse and obtained by AO u/s 133(6) of the act). Therefore, the meaning of affidavit has been taken completely out of context for the sake of making addition. (vii) Evidently, the income was not earned by the appellant out of her manual work or any skill or specialized knowledge or experience, therefore, the same cannot be taxed in her individual hands only on the ground that income has not been shown by her father in his return of income. (viii) Under the facts and circumstances, it is evidently clear that the addition made by AO and sustained by CIT(A) applying the proviso to section 64(1A) is completely unjustified being contrary to the law and facts, hence the same may kindly be quashed. In view of these above mentioned fact and circumstances, and case laws relied upon, the action of the AO is excessive, illegal and without jurisdiction and resultantly the assessment made u/s 148 kindly to be quashed." 5. Per contra, the ld. DR submitted that contention of the ld AR regarding initiation ....
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....of notice u/s 148 by non-jurisdictional Assessing officer, it is noted that on receipt of such notice u/s 148 and thereafter, during the entirety of the reassessment proceedings, there is not a whisper on part of the assessee in challenging and objecting to issuance of notice u/s 148 by non-jurisdictional Assessing officer in terms of section 124(3) of the Act. In the instant case, the assessee has not filed any return of income earlier and even no return of income has been filed in response to notice u/s 148 of the Act forgot about filing the return of income prescribed in notice u/s 148 of the Act. Therefore, in such facts and circumstances of the case, where the assessee has not raised any objections as so provided in terms of secton 124(3) thereby accepting and not objecting to the jurisdiction of the Assessing officer within the timelines as so prescribed in the statue, the assessee cannot plead and take a legal defence challenging the jurisdiction of the Assessing officer after completion of the assessment proceedings. Thus, we agree with contentions advanced by the ld DR and the contents so advanced by the ld AR in this regard cannot be accepted. 9. Now, coming to the secon....
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....er was having only ITS Information which could be a basis to suspect and not the basis to draw a conclusion that the income has escaped assessment. We find that the fact that the Assessing officer was having only ITS information which ideally should have been evident from the reasons and the information in terms of section 133(6) has been collected from the bank subsequent to recording of the reasons is a matter of record and has not been disputed by the Revenue. In such circumstances, we agree with the contentions of the ld AR that possession of ITS information that the assessee has received certain amount could be basis for making further enquiries and in absence of such enquiries being conducted prior to recording of the reasons, there is absence of tangible material in possession of the Assessing officer at the time of recording of reasons and subsequent enquiries after recording of the reasons could not be used to supplement the reasons so recorded by the Assessing officer. Similar view has been taken by us in case of Sh. Shujaat Ali Khan vs. ITO (supra) wherein our findings read as under: "12. On perusal of the reasons so recorded, we find that the Assessing officer had rec....
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.... the assessee has been shown as power of attorney holder of the owner of the immoveable property which again raises a question mark on the tangible nature of the CIB report. We therefore find that the AO has merely gone by the CIB report and was not even in possession of the sale deed and the exact specifics of the transaction at the time of recording of reasons and therefore, it is a case where the proceedings are vitiated for want of tangible material in possession of the AO and lack of reason to believe which is more in the realm of suspicion rather than formation of opinion that income has escaped assessment. The reasons thus recorded and/or the documents available on record, therefore, don't show a link/nexus and relevancy to the opinion formed by the Assessing Officer regarding escapement of income. Further, even though the reopening in the present case was after the expiry of four years from the end of the relevant A.Y 2008-09, given that there was no original return of income filed by the assessee and consequent assessment, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment in terms o....
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.... further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment and in absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside. Our viewis fortified by the decision of the Hon'ble Delhi High Court in case of Meenakshi Overseas Pvt. Ltd. (supra) wherein it was held as under:- "19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material. 20. Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that i....
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....ould be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act. 25. At this stage it requires to be noted that since the original assessment was processed under Section 143(1) of the Act, and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, even though the reopening in the present case was after the expiry of four years from the end of the relevant AY, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment. 26. The first part of Section 147(1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might con....
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.... investigation report." 13. As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by proceeding on the erroneous premise that Assessee had not filed a return when in fact it had." In light of above discussions and in the entirety of facts and circumstances of the case, the assumption of jurisdiction and initiation of the proceedings under Section 147 of the Act to reopen the assessment proceedings does not satisfy the requirement of law and is hereby set-aside. In the result, ground no. 1 of the assessee's appeal is allowed." 12. Moving further, the reasons so recorded talks about the assessee receiving gross receipts of Rs. 21,60,840/- on which TDS of Rs. 2,17,807/- has been deducted. The assessee's PAN number is also mentioned while recording the said reasons and the PAN number carries the date o....
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....rents is not discernable from the reasons so recorded. The provisions of Section 4 relating to charge of tax, provisions of Section 5 regarding scope of total income have to be read along with the provisions of Section 64 regarding clubbing of income of spouse, minor child, etc and in particular, section 64(1A) regarding clubbing of minor's income as applicable in the instant case. The assessee, being a minor, a fact which is clearly emerging from the records, the Assessing officer has to arrive at a prima facie finding while recording the reasons as to how the receipts can be brought to tax in her own hands instead of either of her parents and cannot ignore the existence of the said provisions in terms of section 64(1A) read with proviso thereto as provided in the statue and having not considered the said provisions, it shows non-application of mind by the Assessing officer to the information in his possession and the legal provisions as the matter is not restricted to arriving at the reasonable belief that income has escaped assessment rather the matter is whether the income has escapement assessment in the hands of the assessee to whom it has accrued/arisen/received and can lawf....