TaxTMI 
TaxTMI 
2021 (11) TMI 856
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....t inquiries to verify the source of cash deposited in bank by the assessee and also the claim of interest expenditure as per section 36(1)(iii) of the Act. Accordingly he cancelled the order passed by the AO u/s 143(3) r.w.s 147 of the Act and directed him to pass an order afresh in accordance with law. Aggrieved by the same the assessee has come up in appeal before us raising the following grounds: "1. That the learned PCIT has erred on facts and in law in exercising revisionary powers u/s 263 of the Act while passing the order dated 19-32021. 2. That the learned PCIT has grossly violated the principles of natural justice while passing the order u/s 263 dated 19-3-2021. 3. that the Appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case." 3. We have heard both the parties. The Ld.Counsel for the assessee has before us challenged the assumption of jurisdiction u/s 263 of the Act by the Ld. Pr.CIT, on the ground that the assessment order sought to be revised itself was null and void and no action could be taken in law against such null and void order. Ld.Counsel for the ass....
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.... income is appearing on system hence trading result can not be verified. 6. Since no return of income is appearing on system hence, sources of cash deposit of Rs. 4,17,49,000/- cannot be verified. 7. As the return of income is not appearing on system nor has explained the source thereof, in reply to NMS letter, therefore, source of Cash deposits of Rs. 4,17,49,000/ remains unexplained. In view of the facts as reported above, I have reasons to believe that cash deposits in the banks accounts amounting to Rs. 4,17,49,000/- is the assessee's undisclosed income which has been escaped from assessment in the hands of the assessee for the Assessment Year 2011-12. 8. As per this office record the return of income for the Assessment Year 2011-12 has not been filed, However, considering the acknowledgment of return of income filed by the assessee to be correct and if it is accepted that return of income was filed, even then it make no difference as the same has not been assessed under regular scrutiny assessment u/s 143(3) or 147 of the Income Tax Act, 1961 and as such the provisions of Section 151(2) of the Income Tax Act, 1961 are attracted in this case. ....
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....TANo.464/Chd/2019, dated 13.05.2021. 3) Atlas Cycle Industries, 180 ITR 319. 6. Ld. Counsel for the assessee also challenged the jurisdiction assumed u/s 147 of the Act by the AO contending that except for the AIR/NMS information of cash deposit in the bank account of the assessee, which by itself did not constitute tangible material for formation of belief of escapement of income, there was no other material with the AO. In this regard he relied upon the decision of the coordinate bench in the case of Smt.Prabha Goyal in ITA No.1139/Chd/2017. 7. Ld.DR on the other hand vehemently argued against the challenge by the assessee to the validity of the original proceedings in the impugned collateral proceedings. His contention being that since the assessee is granted a right to challenge the reopening in the proceedings itself, as per the guidelines laid down by the Apex Court in the case of GKN Driveshafts (India) Limited Vs. ITO, 259 ITR 19 and the assessee having not done so, it could not be allowed to challenge it in collateral proceedings. 8. With regard to the deficiencies pointed out by the Ld.Cousel for the assessee in the reasons recorded the Ld.DR controverte....
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....t the validity of an assessment order which has attained finality being challenged in collateral proceedings, we find that this issue has been dealt with by the ITAT in various decisions, as pointed out by the Ld.Counsel for the assessee before us, categorically holding that the validity of original proceedings can be raised in collateral proceedings. It has been so held based on the principle that neither the rule of estoppel nor principle of resjudicata, that neither consent nor waiver, can confer jurisdiction when none exists and that finality or conclusiveness could arise only in respect of orders which are competent orders with jurisdiction and if proceedings are not validly initiated the order would be void order which could never have any finality or conclusiveness. 14. In the case of M/s Westlife Development Ltd.(supra) the ITAT has, after referring to various case laws held that the legality of the proceedings can be agitated in a subsequent proceeding or even in a collateral proceeding or execution proceeding also. The relevant findings of the ITAT are as under: "7. We have heard both the parties on this issue and also gone through the orders passed by the low....
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....sturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be valid under the law as contained in Income Tax Act? It has been vehemently argued before us that the subsequent proceedings (i.e. collateral proceedings) derive strength only from the order passed in the original proceedings (i.e. primary proceedings). Thus, if order passed in the original proceedings is itself il....
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.... and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." 8.3. This judgment was subsequently followed by Hon'ble Supreme Court in the landmark case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193, wherein an issue arose whether a decree can be challenged at the stage of execution and whether a decree which remained uncontested operates as res-judicata qua the parties affected by it. Hon'ble apex court, taking support from aforesaid judgment, observed as under: "In the light of this position in law the question for determination is whether the impugned decree of the Civil Court can be assailed by the appellant in execution. It is already held that it is the Controller under the Act that has exclusive jurisdiction to order ejectment of a tenant from a building in the urban area leased out by the landlord. Thereby the Civil Court....
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.... This case arose under the Income Tax Act with reference to the provisions of Section 147 dealing with re-assessment. The facts were that the assessment was sought to be reopened under Section 147 and notice under section 148 was issued. Validity of reopening was not challenged upto Tribunal and additions were challenged on merits only. The Tribunal restored the matter to the Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the question of jurisdiction to reopen the assessment having been expressly given up by the assessee in the appeal against the reassessment order in the first round, the assessee was debarred from raising that point again before the AAC and the AAC was equally wrong in pe....
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....r the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction, it would be only a nullity confirmed in further appeals'. In this view of the matter, Hon'ble High Court finally answered the reference in favour of the assessee. 8.7. It is further noted that many of these judgments were discussed and followed by the co-ordinate bench of the Tribunal in the case of Indian Farmers Fertilizers Co-operative Ltd vs KIT 105 lTD 33 (Del), wherein a similar issue had arisen. In this case, the issue raised before the bench was whether it is open to the assessee, not having appealed against the reassessment order, to set up or canvass its correctness in collateral proceedings taken for rectification thereof u/s 154. The bench minutely analysed law in this regard and applying the principle of 'coram non judice' and following aforesaid judgments of the supreme court, it was held that if an assessee seeks to challenge the reassessment proceedings as being without jurisdiction, when action for rectification is sought to be taken on the assumption of the validity of the reassessment order, then the assessee ....
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....ent case before us, the assessee's argument in support of his contention that the original proceedings in the present case, u/s 147 of the Act, was invalid, is the insufficiency of information leading to the formation of belief of escapement of income, which it is settled law, is an essential prerequisite for reopening the case u/s 147 of the Act. 17. We have patiently heard at length the arguments of both the parties in this regard and have also carefully perused the contents of the reasons recorded for reopening the case of the assessee placed before us at Paper Book page No.15. We find merit in the contention of Ld.Counsel for the assessee that the reasons recorded do not demonstrate sufficient information in the possession of the AO to lead to the formation of belief of escapement of income. In fact the information available with the AO could not have lead to the formation of belief of escapement of any income at all. 18. As per the reasons recorded by the AO, the belief of escapement of income is based on the information of cash deposits in the bank account of the assessee remaining unexplained on account of no return of income of the assessee available in the system of ....