TaxTMI 
TaxTMI 
2026 (7) TMI 1483
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....28.03.2017 under "Exchange of Information" article 5 of the Tax Information Exchange Agreement (TIEA) between the British Virgin Islands and India qua Shri Sundru Bhagwandas Hiranandani having foreign assets/income stating therein that Shri Sundru Bhagwandas Hiranandani is one of the beneficial owners of the company and register of directors and shareholders were provided as per which Shri Sundru Bhagwandas Hirandandani has been one of the director and shareholder of the company and passport of the assessee bearing Passport No.E3673328 was provided which was submitted by the assessee as due diligence document. On perusal of the income tax return of Shri Sundru Bhagwandas Hiranandani it was found that he has he had failed to declare his foreign income/assets in the income tax return, which was mandatory to do so and also that he has failed to declare his undisclosed income/assets in one time compliance window provided in Chapter-VI of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 which was provided by the Government of India to come clean with respect to hitherto undisclosed foreign income and assets. Consequently, the ADIT(Investigation), Unit-....
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....of the Joint Commissioner (or the Joint Director) if the penalty exceeds one lakh rupees and the tax authority levying the penalty is in the rank of income-tax officer, and if the penalty exceeds five lakh rupees, the tax authority levying the penalty is in the rank of Assistant Commissioner or Deputy Commissioner (or Assistant Director or Deputy Director. Therefore, we find merit in the contention of the assessee that in the present case the penalty has been levied by the AO under the BMA Act, 2015, which is in the rank of Additional CIT Range-3(Central), Kolkata, who is the approving authority under the Act. Therefore, we not in agreement with the conclusion drawn by the ld. CIT(A) that the Additional CIT or the Joint CIT of Central charges has been given powers and functions of AO under the BMA Act, 2015 were rightly exercised by the Add.CIT, Range-3(Central), Kolkata. Therefore, we are inclined to hold that the penalty order passed by the Additional CIT as without jurisdiction. The issue raised by the assessee is allowed. 8. So far as the correct assessment year in which the penalty is required to be levied, we note that the assessee vide letter dated 03.02.2017 has already ....
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.... safeguard and protect the funds in case of any adverse eventuality if it happens to me. Statement of my wife and son were also recorded u/s 131 and they have also affirmed my statement and have denied about their having made any investments. In fact, originally when I was enquired about the existence of any offshore account earlier on previous occasions then at that point of time I have denied about the existence of the same as because the account was totally closed at that point of time and there was no existence of arry account so as to mention the same in the statement. This is the reason the denial was made by me and no further action was taken. However, during the course of discussion, I was enlightened by you on the matter and learnt that inspite of there being no Bank account in existence as on the date of the recording of the previous statement but its existence prior to that itself was required to be admitted by me and that is what has been done by me. I have also stated that I will make the payment of the taxes in respect of such undisclosed income and requested for non-initiation of the penal proceeding as well as the launching of prosecution. I am very much ob....
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....ar as the Principal DIT(Investigation) Kolkata vide order dated 11.1.2018 authorized the ADIT(Investigation) Ward-3(4) Kolkata to exercise the concurrent powers in respect of the assessee. Even on this count, the penalty order passed by the AO i.e. the Additional CIT is bad in law and cannot be sustained. 11. The ld. AR vehemently submitted before the Bench that the assessment order u/s. 10(3) of the BMA Act, 2015 dated 31.12.2018 by calculating the total undisclosed foreign assets in the form of four bank accounts having account Nos.196324, 146292, 820517 & 140020 maintained with UBS AG Singhapore held in the name of BVI entity Sheer Beauty Investments Ltd. at Rs. 3,27,35,347/- of the Act, is invalid and ex-facie, nullity in the eyes of law on several scores and therefore, the consequential revisionary proceeding initiated by the ld. Add. CIT u/s 40 read with section 46 of BMA Act is also invalid and bad in law. In defense of his arguments, the ld. AR stated that the consequential proceedings would be invalid and the assessee can challenge the validity of the assessment framed in the colateral/consequential proceedings. The ld. AR in defense of his arguments relied on the decis....
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....on 16.04.2022. 10. It is, therefore, the contention of the petitioner that the notice u/s. 148 being an unsigned notice, the same is invalid and consequently proceeding on the basis of an invalid notice vitiates the entire reassessment proceedings as the same is without any jurisdiction. It is further the argument of learned counsel for the petitioner that proceeding on the basis of an invalid notice, which in any case, has been issued after three years from the end of the relevant assessment year, as required under the provisions of section 149(1)(b) of the Act, constitutes a jurisdictional error on the part of the respondents. 11. Learned counsel for the petitioner makes a reference to a Division Bench judgment of the High Court of Calcutta in Commissioner of Income Tax v. Aparna Agency (P.) Ltd.1 to contend that the provisions of section 192(B) of the Act do not provide for a cure when the notice under the Act is invalid by virtue of it not having a signature affixed as is required under the relevant provisions. He further refers to another judgment of the High Court of Calcutta in B.K. Gooyee v. Commissioner of Income-tax2 and a judgment of a Division Bench of....
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.... invalid notice and consequently equivalent to no notice. Hence, these cases do not militate against the principle that there can be no waiver where the condition precedent for assumption of jurisdiction is not fulfilled. Accordingly, my opinion is that the notice under section 34 of the Income-tax Act, 1922, to be a proper, valid and legal notice, requires to be signed by the Income-tax Officer, non-compliance of which would make it bad and all the proceedings started thereafter would be without jurisdiction. Mr. Meyer, however, in the last resort contended that in the facts of this case, the assessee in any event, waived the notice. The expression "wavier" has a professional meaning. It is true that the notice was duly served and was said to have been received by the assessee, but it is determined on high authority, that the notice under section 34 (I mean a valid notice) is a condition precedent for the assumption of jurisdiction. A notice under section 34 is therefore, not merely a procedural requirement. In its absence, it does not become a case of procedural defect. The difference between the cases of want of jurisdiction and those of irregular exercise of jurisdicti....
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....o the assumption of jurisdiction by the Assessing Officer. The existence of a valid notice is, therefore, a jurisdictional fact. The question, therefore, is not to be looked at from the perspective that the decision to issue notice was by an authority competent in that behalf under the Act and, therefore, submitting to his jurisdiction without objection, the inference of waiver arises. The question being one of jurisdiction, to be more specific the condition precedent to the assumption of jurisdiction what has to be seen is that the person that purported to exercise the jurisdiction vested in him had in fact exercised that jurisdiction and signed the said notice. The said test has not been satisfied in the case on hand. Unlike the judgment of this court in Anand and Co. [1994] 207 ITR 418 relied upon by the Revenue the case on hand is not one where the authenticity of the show-cause notice is in question. In the case on hand as held by the fact-finding authority the show-cause notice has not been signed by any person and the place intended for signature was kept blank. 16. The Madhya Pradesh High Court has taken a similar view in Umashankar Mishra (supra) whilst following ....
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...., was not right in holding that the notice issued under section 271(1)(a) of the Act was a valid notice in the eye of law. 6. In view of our answer to the first question, our answer to the second question is that the Tribunal was not right in holding that the absence of the signature on the notice simply constituted a mistake or omission within the meaning of section 292B of the Act. 7. In view of the fact that no valid notice was served on the assessee before levying penalty, our answer to the third question is that, on the facts and in the circumstances of the case, the penalty levied under section 271(1)(a) of the Act was not valid. Thus, our answers to all the three questions referred to this court are in the negative and in favour of the assessee. 17. Anand And Co. (supra) cited by the Revenue, proceeds on the basis that the notice issued u/s. 148 of the Act did contain a signature, but the question before the Calcutta High Court was whether the signature was authenticated or not. In that case, the signature was affixed in the form of a curved line, which the assessee claimed was not an authentic signature. It is in that context that the High Court o....
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....of law as to whether the Tribunal was right in holding that the absence of a signature on the notice constitutes a mistake or omission within the meaning of section 292B of the Act and while addressing itself to that question, has concluded that in the absence of a signature on the notice, the same would not constitute a mistake or omission and would not be curable under the provisions of section 292B of the Act. 21. We are, therefore, of the considered opinion that in the present case, the notice u/s. 148 dated 02.04.2022 having no signature affixed on it, digitally or manually, the same is invalid and would not vest the Assessing Officer with any further jurisdiction to proceed to reassess the income of the petitioner. Consequently, the notice dated 02.04.2022 u/s. 148 of the Act issued to the petitioner being invalid and sought to be issued after three years from the end of the relevant assessment year 2015-16 with which we are concerned in this petition, any steps taken by the respondents in furtherance of notice dated 21.03.2022 issued under clause (b) of section 148A of the Act and order dated 02.04.2022 issued under clause (d) of section 148A of the Act, would be wi....
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....e in so far as the operative part is concerned. The appeal accordingly is allowed, but without any order as to costs. 15. Similarly, the co-ordinate Bench in M/s Classic Flour & Food Processing Pvt. Ltd. (supra), the co-ordinate Bench as held as under:- "After having considered the judicial precedent on the issue we are of the view that the validity of the order passed by the AO which is being interdicted by the Ld. PCIT in the impugned order assailed before us, can be examined as to whether the AO had the requisite jurisdiction to re-open/re-assess the escaped income of the assessee. Therefore, in this case we need to examine the action of AO dated 29.12.2017 passed u/s 147 of the Act which action of AO depends upon the AO assuming validly the jurisdiction to pass an order of assessment u/s 147 of the Act. It is settled law that the AO can reopen the assessment only after fulfilling the conditions laid down in the said section (section 147 of the Act) namely reason to believe that income chargeable to tax for that assessment year has escaped assessment. If this essential condition is not satisfied by the AO before initiating assuming jurisdiction u/s 147 of the Act the....
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....e a subject/assessee and to determine the tax payable by that subject/assessee by framing an assessment order for an Assessment year. The concept of assessment is governed by the time barring rule and an assessee acquires a right as to the finality of proceedings. Queitus of the completed assessment can be disturbed only when there is information or evidence regarding undisclosed income or AO had information in his possession showing escapement of income. So when an AO receives an information regarding undisclosed income of an assessee in respect of an assessment year which has escaped assessment, then the AO has to examine the information by verifying the source of it and then also has to keep in mind that information adverse against an assessee may trigger "reason to suspect"; then the AO to make reasonable enquiry and collect material which would make him believe, that there is in fact an escapement of income. And thereafter if he believes the existence of escapement of income then record his reason to believe escapement of income and then issue notice u/s. 148 of the Act and not before that. Let us look at the settled position of law on this issue. 11. As noted (supra)....
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....nd not that of any other authority, because then it will be against one of the basic feature of the Constitution of India ie, the Rule of Law, wherein the Parliament has empowered this reopening jurisdiction only to that of Assessing Officer and that is why if the reason to believe escapement of income is not that of AO, the assumption of jurisdiction to re-open, has been held to be vitiated and resultantly bad in law, since it will be on the basis of borrowed satisfaction. 13. Now coming back to the present appeal, when we examine the legal issue on the touchstone of the settled judicial precedents on re-opening let us examine the reason recorded by the AO to re-open the assessment of AY 2010-11 pursuant to which the AO issued the notice u/s 148 of the Act dated 17.03.2017. According to the Ld. AR, the premises/jurisdictional fact for reopening the assessment is discernible from the assessment order dated 29.12.2017 itself wherein the AO in his own words have stated as under: "Assessee submitted return on 29.07.2010, showing total income of Rs. 443/- and the case was processed accordingly, subsequently the case was selected for scrutiny u/s 147 on the basis of an....
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.... the impugned order wherein he has made a specific finding of fact in his conclusion recorded at page 40 of the impugned order wherein he concludes in his own words "in conclusion the relevant fact which constitute the present case are that the alleged large transaction of M/s. Miracle have not been reached directly/indirectly to the assessee company as evident from bank account of the assessee company nor through share subscriber companies (shareholders) to whom the assessee company has allotted shares." Therefore, according to the Ld. AR, this finding of fact by the Ld. Pr. CIT clearly reveals that the deposits in the bank account of M/s. Miracle has not been routed to the assessee company which assertion of the Ld. A.R. could not be rebutted/contradicted by the Ld. CITDR. So Ergo, we note that the foundation on which the reason to believe escapement of income by the AO to issue notice u/s. 148 of the Act on 17.03.2017 itself was on wrong assumption of fact as is evident from the finding of fact by the Ld. PCIT that no money from M/s Miracle has been routed to the assessee company directly or indirectly whereas the foundation fact on the basis of which reopened the assessment as ....
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.... of bonafide mistakes, or, at worse, harmless carelessness. The answer is emphatically in the negative. The case before us is of, at best, inheritance of a bank account which the assessee's father opened forty years ago, and the assessee's father, as records indicate, was from a well-placed business family, with business interests abroad. The amount in the bank account, considering the status of the persons involved, is a very small amount of money. The person who inherited the said money Assessment year 2017-18 or the persons who were signatories to the bank account, did not put that money to any use so much so that ultimately that money was donated to a charity of global repute. The assessee and her husband were signatories to the said bank account because, as is the uncontroverted stand of the assessee, the actual owner, late Dr Pramila Gandhi had health issues and she was not in a position to travel to Zurich when formalities in respect pf the account inherited by her were to be completed. The subsequent developments spanning over several decades unambiguously corroborate this stand of the assessee. When we objectively see all these factors in totality, the inescapable impressi....