2023 (5) TMI 1048 - AT - Income Tax

Validity of the reopening of the assessment - jurisdiction of proceedings - initiation of proceedings by an Authority which has no jurisdiction - HELD THAT - From the decision of CIT(A), it is clear that notice u/s 148 was not issued by the jurisdictional AO. As per CIT(A), the assessment was framed by Jurisdictional AO i.e. ITO, Ward-65(5), New Delhi. The Revenue has miserably failed to answer the question of jurisdiction as Ld.CIT(A in the impugned order himself states that the notice u/s 148 was not issued by the jurisdictional AO . Therefore, it can be safely inferred that notice u/s 148 of the Act was issued by the Authority which has no jurisdiction for the assessee. Revenue has not brought any order by the Competent Authority whereby the jurisdiction was conferred on the Authority who issued notice u/s 148 of the Act. In the absence of such order, we hold that assessment order passed by the AO was based on invalid notice hence, it also vitiated the assessment order in the light of binding precedents as cited by the assessee. The assessment order is hereby, quashed. Addition u/s 69A - as stated by the assessee that there were cash withdrawals and deposits. Before Ld.CIT(A), it was stated that the cash was withdrawn and deposited in the bank account. Assessee has pointed out that a sum was available out of withdrawals on the bank account for making the deposits. CIT(A) has not given any findings. Therefore, facts or findings of the Lower Authorities are based on conjectures and surmises and ignored the facts placed on record. AO was not justified in making the addition. The grounds raised by the assessee are allowed on merit. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of reopening assessment proceedings under section 148.
2. Jurisdiction of the Assessing Officer (AO).
3. Validity of the notice under section 143(2).
4. Addition under section 69A of the Income Tax Act.

Summary:

1. Validity of Reopening Assessment Proceedings under Section 148:
The assessee challenged the reopening of the assessment proceedings under section 148, arguing that the notice was issued without jurisdiction and lacked cogent material or evidence to form a reason to believe that income had escaped assessment. The Tribunal noted that the notice under section 148 was issued based on AIR information without any tangible material, which is insufficient to assume valid jurisdiction. The Tribunal cited various case laws, including the Delhi High Court's decision in Pr. CIT Vs. Meenakshi Overseas, which held that reasons recorded without independent application of mind and tangible material cannot be sustained. Consequently, the Tribunal found the reopening of the assessment proceedings invalid.

2. Jurisdiction of the Assessing Officer (AO):
The assessee argued that the notice under section 148 was issued by an AO who did not have jurisdiction over the assessee. The Tribunal observed that the notice was issued by AO Ward 65(1), New Delhi, whereas the jurisdiction lay with AO Ward 65(5), New Delhi, as per Notification No. 70/2014. The Tribunal cited the case of Mukesh Kumar Vs. ITO, where a similar issue led to the quashing of the assessment proceedings. The Tribunal concluded that the notice was issued by a non-jurisdictional AO, rendering the assessment order void-ab-initio.

3. Validity of the Notice under Section 143(2):
The assessee contended that the notice under section 143(2) was neither issued nor served, which is a mandatory requirement before passing any order under section 143(3)/147. The Tribunal found that no notice under section 143(2) was issued, as confirmed by the assessment order and the order sheet maintained by the AO. The Tribunal cited the Supreme Court's decision in ACIT Vs. Hotel Blue Moon, which held that the requirement to issue notice under section 143(2) is mandatory and not a procedural irregularity. The Tribunal quashed the assessment due to the absence of a valid notice under section 143(2).

4. Addition under Section 69A:
The assessee challenged the addition under section 69A, arguing that the provisions of section 44AF (presumptive taxation) applied and that the AO failed to consider cash withdrawals. The Tribunal noted that the assessee provided evidence of cash withdrawals amounting to Rs. 14,80,750/-, which the AO ignored. The Tribunal found that the AO's addition was based on conjectures and surmises and lacked consideration of the facts placed on record. Consequently, the Tribunal deleted the addition under section 69A.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for both assessment years 2008-09 and 2009-10, quashing the assessment orders due to invalid jurisdiction, absence of a valid notice under section 143(2), and improper additions under section 69A.