TaxTMI 
TaxTMI 
2022 (1) TMI 605
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.... proceedings, look into them and be pleased to issue a writ of mandamus or any other appropriate writ, order or direction directing the Respondents to grant complete stay of demand arising out of assessment order passed u/s.143(3) r.w.s. 144B dated 19.04.2021 at Annexure-F. C) Pending the hearing and final disposal of this application, this Hon'ble Court be pleased to stay operation and implementation of the assessment order passed u/s.143(3) r.w.s. 144B dated 19.04.2021 at Annexure-F and further stay the recovery of demand in pursuance of the notice issued u/s.156 at Annexure-G. D) This Hon'ble Court be pleased to grant any further or other relief as this Hon'ble Court deems just and proper in the interest of justice, and E) This Hon'ble Court be pleased to allow this application with costs against the respondents." 2. The facts, giving rise to this litigation, may be summarized as under; 2.1 The writ applicant came to be incorporated as a partnership firm on 16.12.2017. The partnership firm is engaged in the business of real estate development. It is the case of the firm that it has ten partners. For the year under consideration, as the firm was c....
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.... the case of the partners, the income earned by parties is not sufficient so as to introduce the same in the capital of the firm. Therefore, the assessee has shown that the partners have taken loans from some other parties to introduce the capital in the firm which is not backed by supporting evidences. Therefore, as required the assessee has not prove the onus of the creditworthiness of the partners in introducing the capital in the assessee firm and also the genuineness and creditworthiness of the other parties from whom funds have been received from the partners. 4.6 In connection with the same for clear understanding, the provisions of Section 68 of the I.T. Act are reproduced as under; "Section 68; Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him, is not, in the opinion of the (Assessing Officer, satisfactory, the sum so credited may be charged to Income Tax as the income of the assessee of that previous year.' 4.7 From the plain reading of the same, it is seen that the onus is on the assessee to cl....
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....entity, genuineness and creditworthiness of the other parties from whom the partners have shown to have received funds are also not proved are calculated as under; Sr. No. Name of the Partner Amount (Rs.) 1. Ashwinbhai K. Zalavaidya 22,63,000 2. Bharatbhai M. Khunt 28,96,000 3. Hareshbhai J. Zalavadiya 27,15,000 4. Hashmukhbhai M. Khunt 28,96,000 5. Jagdishbhai B. Hirpara 50,68,000 6. Kaushik Kanubhai Hirpara 50,68,000 7. Narendrabhai B. Hirpara 4,00,000 8. Ravjibhai K. Patel 17,06,000 9. Sanjaykumar M. Kanani 41,63,000 Total 2,71,75,000 4.11 The amount of Rs. 2,71,75,000/- is treated as unexplained cash credit in the books of the assessee firm and brought to tax under Section 68 r.w.s 115BBE of the Act being unexplained cash credits. Penalty proceedings u/s. 271AAC of the I.T. Act 1961 is initiated separately. 5.1 Subject to the above, the income of the assessee is determined as under; Amount in Rs. Total income as per order u/s.143(1) dated 26.01.2019 Nil Add. Unexplained Cash Credit u/s.68 rws 115BBE-capital intr....
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....eproduction of the draft assessment order. It fails to consider any of the details/information furnished by the writ applicant with respect to the specific queries raised by the Investigating Officer. Mr. Shah would submit that it is just a mechanical exercise undertaken by the Assessing Officer and the same would frustrate the very object with which Section 144B came to be introduced in the Act with effect from 01.04.2021. Mr. Shah laid much emphasis on the subclause (9) to Section 144B which starts with a non-obstante clause. Sub-section (9) to Section 144B provides that notwithstanding anything contained in any other provision of the Act, the assessment made under sub-section (3) of Section 143 or under Section 144 in the cases referred to in sub-section (2) would be treated as non-est if such assessment is found to be not in accordance with the procedure laid down under Section 144B of the Act. 5. Mr. Shah, in support of his aforesaid submissions, has placed strong reliance on one recent pronouncement of the Bombay High Court in the case of Mantra Industries Ltd. vs. National Faceless Assessment Centre (NFAC or NeAC), reported in (2021) 131 taxmann.com 165 (Bombay), wherein ....
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....opposed by Ms. Kalpana Raval, the learned senior standing counsel appearing for the Revenue. Ms. Raval vehemently submitted that no error, not to speak of any error of law, could be said to have been committed by the Assessing Officer in passing the impugned assessment order. She would submit that even if there is violation of the principles of natural justice, or the order is without jurisdiction, the Writ Court may decline to entertain the writ application if there is an alternative remedy in the form of a statutory appeal. According to Ms. Raval, the decision of the Supreme Court in the case of Baburam vs. Zila Parishad, AIR 1969 SC 556 makes such position of law abundantly clear. Ms. Raval would submit that in Titaghur Paper Mills Co. Ltd. vs. State of Orissa, AIR 1983 SC 603, the appellant therein had pleaded that there was violation of principles of natural justice and the impugned order was without jurisdiction, yet the Supreme Court held that the writ applicant should avail his alternative remedy of appeal. Thus, according to Ms. Raval, it is well settled that when an alternative and equally efficacious remedy is open to the litigant, he should be required to pursue that re....
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.... under sub-section (2) of section 143 has been issued by the Assessing Officer or the prescribed income-tax authority, as the case may be; or (b) has not furnished his return of income in response to a notice issued under sub-section (1) of section 142 by the Assessing Officer; or (c) has not furnished his return of income under subsection (1) of section 148 and a notice under subsection (1) of section 142 has been issued by the Assessing Officer, the National Faceless Assessment Centre shall intimate the assessee that assessment in his case shall be completed in accordance with the procedure laid down under this section; (iv) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit in any one Regional Faceless Assessment Centre through an automated allocation system; (v) where a case is assigned to the assessment unit, it may make a request to the National Faceless Assessment Centre for- (a) obtaining such further information, documents or evidence from the assessee or any other person, as it may specify; (b) conducti....
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.... (xiii) where the assessee fails to file response to the notice referred to in clause (xi) within the time specified therein or within the extended time, if any, the National Faceless Assessment Centre shall intimate such failure to the assessment unit; (xiv) the assessment unit shall, after taking into account all the relevant material available on the record make in writing, a draft assessment order or, in a case where intimation referred to in clause (xiii) is received from the National Faceless Assessment Centre, make in writing, a draft assessment order to the best of its judgment, either accepting the income or sum payable by, or sum refundable to, the assessee as per his return or making variation to the said income or sum, and send a copy of such order to the National Faceless Assessment Centre; (xv) the assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein, if any; (xvi) the National Faceless Assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, wh....
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....h his response to the National Faceless Assessment Centre on or before the date and time specified in the notice or within the extended time, if any; (xxiii) the National Faceless Assessment Centre shall, - (a) where no response to the show-cause notice is received as per clause (xxii),- (A) in a case where the draft assessment order or the final draft assessment order is in respect of an eligible assessee and proposes to make any variation which is prejudicial to the interest of said assessee, forward the draft assessment order or final draft assessment order to such assessee; or (B) in any other case, finalise the assessment as per the draft assessment order or the final draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; (b) in any other case, send the response received from the assessee to the assessment unit; (xxiv) the assessment unit shall, after taking into account the response furnished by the assessee, make a r....
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.... the procedure prescribed. 13. Sub-section (9) to Section 144B reads thus; "9) Notwithstanding anything contained in any other provision of this Act, assessment made under subsection (3) of section 143 or under section 144 in the cases referred to in sub-section (2) (other than the cases transferred under sub-section (8), on or after the 1st day of April, 2021), shall be non-est if such assessment is not made in accordance with the procedure laid down under this section." 14. Sub-section (9) referred to above makes it clear that if the procedure laid down under Section 144B is not followed or complied with, the assessment would be rendered non-est. When the legislature has thought fit to use the word non-est, it would mean a nullity. If it is to be treated as a nullity, then the argument of alternative remedy of an appeal should fail. The Writ Court should not be hesitant to quash and set aside an order which could be termed as non-est. Why do we say that the impugned assessment order in the present case could be termed as non-est?. We have read and re-read the draft assessment order and also the impugned assessment order. Mr. Shah is right in his submission that the....
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....roperly taxed or not. The assessee is only to explain that this investment has been made by the particular individual and it is the responsibility of that individual to account for the investment made by him. If that person owns that entry, then the burden of the assessee-firm is discharged. It is open to the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. So far as the responsibility of the assessee-firm is concerned, it is satisfactorily discharged. Whether that individual person is an income tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purposes of income tax. It is open to the Assessing Officer to take appropriate action under Section 69 of the Act against the person who has not been able to explain the investment. 18. In the aforesaid context, we may refer to and rely upon a very lucid and irudit judgment of the Gauhati High....
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....Section 106, we notice that what is the source from which an assessee has obtained the loan can be safely held to be a fact, which is actually within the special knowledge of the assessee ; hence, it is the burden of the assessee to show the source(s) from which he has received the loans. Once the assessee discloses the source(s) from which he has received the loans, his burden under Section 106 stands discharged and the onus, then, shifts to the Assessing Officer to show, if he wants to treat the loan as an income of the assessee from undisclosed source, that the transaction(s) between the assessee and the creditor is/are not genuine or that the creditor has no creditworthiness and/or that the money, which has been received by the assessee in the form of loans, actually belonged to the assessee himself. 15. There can be no doubt that in order to establish the receipt of cash credit as required under Section 68, the assessee must satisfy three important conditions, namely, (i) identity of the creditor, (ii) genuineness of the transaction, and (iii) financial capability of the person giving the cash credit to the assessee, i.e., the creditworthiness of the creditor. ....
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.... or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the assessee. 17. A person may have funds from any source and an assessee, on such information received, may take loan from such a person. It is not the business of the assessee to find out whether the source or sources from which the creditor had agreed to advance the amounts were genuine or not. If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion tha....
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....gether, the logical interpretation will be that while the assessee has to prove only his special knowledge, i.e., the source from where he has received the credit and once he discloses the source from which he has received the money, he must also establish that so far as his transaction with his creditor is concerned, the same is genuine and his creditor had the creditworthiness to advance the loan, which the assessee had received. When the assessee discharges the burden so placed on him, the onus, then, shifts to the Assessing Officer if the Assessing Officer wishes to assess the said loan as the income of the assessee from undisclosed source, to prove either by direct evidence or indirect/circumstantial evidence that the money, which the assessee received from the creditor actually belonged to, and was owned by, the assessee himself. If there is direct evidence to show that the loan received by the assessee actually belonged to the assessee, there will be no difficulty in assessing such amount as the income of the assessee from undisclosed source ; but if there is no direct evidence in this regard, then, the indirect or circumstantial evidence has to be conclusive in nature and m....
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....h has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee. We are fortified in adopting this view from the following observations made in Tolaram Daga's case [1966] 59 ITR 632 (Assam) (page 635) : "At the outset, we have to point out that there is no substance in the contention that the sources from which the money was realised by the third party are within the special knowledge of the petitioner as the depositor happens to be his wife. Whether he has knowledge at all of the source of the money deposited by the third-party is a matter which has to be decided on evidence. .... Under law, in the absence of specific proof of that knowledge, it cannot be assumed that the assessee has the knowledge in question within the meaning of Section 106 of the Evidence Act. . ... To require the firm or the individual partners to go further and adduce proof of the sources from which the deposits in question appearing in the accounts in the name of third parties were derived by them, would be placing a burden on the firm as well as the partners, which is not required or justified by law. For ought we know, in most cases it....