TaxTMI 
TaxTMI 
2021 (11) TMI 404
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.... 3. The very action taken u/s 147 r/w 148 is bad in law without 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 ....
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....ued by Non Jurisdictional AO: 1.1 At the outset it is submitted that the PAN of the 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 hea....
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....rary. 2.3 Therefore, the ground so taken by the AO to form belief of escapement is factually incorrect. The reasons were recorded on wrong presumption and without looking 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 ....
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....co. 09/09/04 1000000 Harjeet 11/01, Gurudwara Road, Jangpura, .Bhogal, new delhi110014. AARPS3442 H Aneja Ji 5C/13, New Rohtak Road, Karol bagh, New Delhi AAEPA5548H 400000 Cash deposit Mahalaxmi Finance co. cheque. In my considered opinion 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....
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....imply made the totals of figures appearing in Form 26AS without any verification or examination of the same. 3.6 It is also a settled law that the information used by the AO for having a reason to believe must be specific & reliable but not vague 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 t....
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....these persons which either find mention in the report or as enclosures when the same was forwarded to the Assessing officer. Therefore, it transpires that there is no further examination which has been carried out by the Assessing officer. The fact that the assessee has 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....
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....on 148 of the Income-tax Act, 1961 - Income escaping assessment - Sanction for issue of notice (Recording of satisfaction) - High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under. 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 acco....
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....orate reasons for agreeing with noting put up-At same time, satisfaction had to be recorded of given case which could be reflected in briefest possible manner- In present case, exercise appears to have been ritualistic and formal rather than meaningful, which was rationale for safeguard of approval by higher ranking officerRevenue'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....
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....sfaction/approval recorded for issue of notice u/s. 148 of the Act as well as the Paper Book filed by the Assessee containing pages 1-41 of the Paper Book in which he has attached the copy of AIR information; copy of reasons recorded; copy of approval Performa u/s. 151; letter dated 26.2.2015 issued by AO; letter dated 12.3.2015 issued by AO; cash flow statement; confirmation from Rama Devi; bank 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.....
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....of convenience the same is being reproduced hereunder: "Section 11 of India Contract Act, 1872 11. Who are competent to contract.-every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject" In view of this, it is evident that assesse was disqualified for entering 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 receip....
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....ppellant was working as an agent and received the commission in her own capacity or provided any service to M/s Eve Jewels Limited. There is no denial from the fact that amount was received in the bank account of appellant. More importantly, affidavit dated 17.08.2017 (PBP 11-12) was filed in support of letter dated 14.08.2017 (PBP-6) to substantiate the claim that reassessment action has been taken on the factually incorrect assumption of fact because instead of 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 m....
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....y rejected by the AO and entire commission income of Rs. 21,60,840/- was brought to tax in her hands and which has rightly been confirmed by the ld CIT(A). It was accordingly submitted that there is no infirminity in the findings and order of the ld CIT(A) and same should be upheld and the appeal of the assessee be dismissed. 8. We have heard the rival contentions and purused the material available on record. Firstly, regarding the contention of the ld AR challenging the issuance 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....
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....t has been further submitted that after recording the said reasons, a notice u/s 133(6) dated 22.08.2017 was issued to Punjab National Bank to obtain copies of bank statements of the account in which such alleged receipts were credited. It was accordingly submitted that at the time of recording the reasons, there was no tangible material in the hands of the Assessing officer to have a reason to believe that income to the extent of Rs. 21,60,840/- has escaped the assessment and the Assessing officer 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 c....
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....at income has escaped assessment and the matter is fit for issuance of notice u/s 148 of the Act. Such examination is required to be carried out before issuance of notice u/s 148 as the same is required for the Assessing officer to form his own independent opinion that the income has escaped assessment. In the instant case, there is no such examination and investigation carried out by the AO and infact, only after recording of the reasons, he has sought copy of the sale deed from the Sub-Registrar where 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, the....
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....essing 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:- "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 ....
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....st be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should 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 ....
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....ection143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions "one after the other" and that the satisfaction arrived at by the AO was a "borrowed satisfaction" and at best "a reproduction of the conclusion in the 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....
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.... as they were recorded by the Assessing officer. And it is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons that the income chargeable to tax has escaped assessment. In the instant case, we find that the reasons so recorded are silent as to how receipts in hands of the minor can be brought to tax in her own hands in terms of section 64(1A). How the Assessing officer has reached a prima facie view and formed a reasonable belief that such receipts can be brought to tax in the hands of the minor and not in hands of either of her parents 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....