2024 (1) TMI 1395 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - reasons to believe - Addition in respect of all deposits in bank account u/s 68 being unexplained cash credits - assessment was reopened on the basis of information received from DDIT (Investigation) and there were debits and credits entries in the account of the assessee from dubious entities unearthed from investigation and inquiry carried out by the Department - AO has not issued the statutory notice for informing the change in the incumbency u/s. 129 and validity of jurisdiction of the AO under sections 120, 124 127 - HELD THAT - In this case, original assessment order was passed by DCIT-Central Circle-39, Mumbai. The proceedings u/s. 148 and final re-assessment order dated 21/12/2017 has been passed by DCIT, Central Circle-6(4), Mumbai. In response to the RTI application filed by the assessee it has been informed that Central Circle-39 after restructuring was re-named as Central Circle-6(4) and there was no change of jurisdiction in the case of the assessee. Copy of relevant cadre restructuring has also been enclosed to state that the original change of jurisdiction Central Circle-39 after restructuring was re-named as Central Circle-6(4) and hence, there was no change of the jurisdiction of the assessee. Later on, the assessee s case was decentralized vide order passed u/s. 127 by PCIT-Central-3 Mumbai to ITO Ward 12(1)(1), Mumbai on 06/07/2020. Copy of PAN history has also been given by the department before us stating that Central Circle-6(4), Mumbai had jurisdiction till 28/11/2020 and later on it was transferred to ward -12(1)(1), Mumbai Thus, at the time of issuance of notice u/s. 148 and passing of the reassessment order, the jurisdiction lied with Central Circle-6(4), Mumbai only and hence it cannot held that AO lacked jurisdiction or there is any violation of section 120 or Section 124 or Section 127. We do not find any substance and basis for challenging the jurisdiction of the ld. AO by the assessee when the AO who had issued notice u/s. 148 and has passed assessment order had the original jurisdiction upon the assessee. Moreover, assessee had not raised this objection before the ld. AO that he did not have proper jurisdiction which he should have in terms of section 124(3). In so far as ground lack of issuance of notice u/s. 129, is also ill-conceived, because there is no change of incumbent. Accordingly, the grounds No. 1 2 as raised by the assessee are dismissed. Notice issued u/s. 148 is within time limit prescribed u/s 149 or not? - w hether notice has been issued on or before 31/03/2017 or post 31/03/2017? - procedure for service by post - HELD THAT - The notice u/s. 148 was issued and sent through speed post on the registered office and the address mentioned by the assessee on 31st March 2017 which was the date post when limitation ends. As in the case of R.K. Upadhyaya vs. Shanabhai P. Patel 1987 (4) TMI 5 - SUPREME COURT has held that service of notice u/s. 148 is not a condition precedent to conferment of jurisdiction of the ITO but it is a condition precedent for making of the order of the assessment. In the present case the notice has been issued within the time limit prescribed u/s. 149 and therefore, the ground and the objection raised by the assessee is dismissed. Further, if notice has been issued on the registered address or the address which has been communicated by the assessee to the department and if the same has been sent through registered post or speed post, then in so far as the onus cast upon the AO to send the notice stands discharged. If the notice has been sent through post with proper address, sent by Registered post with acknowledgement, then the presumption is that delivery of the assessee has been affected. However, here in this case as noted above, the notice sent through speed post returned back with the remark left . Even if it is held that notice issued on 31/03/2017 sent through speed post has not been received because postal authority has stated that assessee left the premise , then in so far as issue of limitation is concerned which is to be reckoned from the date of issue is valid. Here in this case the notice sent through speed post may not have been served upon the assessee as it was not found on its registered / official address, then here in this case it has also been brought on record that notices were also sent through ITBA portal on 31/03/2017 and by email which mail assessee received post 12 AM (i.e., 1 02 AM) on 01/04/2017. Even if it is presumed email has been sent post 12 AM, however, the fact of the matter is that once, notice has been issued within time and even if assessee has received the notice on the next date i.e. on 1/04/2017 by electronic media or email which is valid mode of service of notice u/s 282 and 282A, then it is valid service of notice. Accordingly, there is no infirmity in assumption of jurisdiction to pass the reassessment order by the AO. Here the case of the assessee is that notice has been issued post 31st March 2017, which fact we have already discussed and dismissed the assessee s objection. Thus, it cannot be said that the initiation of proceedings u/s. 148 r.w.s. 149 is bad in law. Accordingly, this ground raised by the assessee is rejected. Approval u/s. 151 by ld. PCIT Central Circle-3 is mechanical as he has merely stated yes, I am satisfied. It is a fit case for issue of notice u/s. 148 - The information and inquiry does constitute a tangible material having direct live link nexus that deposits are unexplained and income chargeable to tax has escaped assessment. Thus, it cannot be held that the there was no prima facie belief by the AO that income chargeable to tax has escapement assessment. If reasons are otherwise sustainable in law and the competent authority has given his approval that he is satisfied on such reasons recorded which are based on relevant material indicating escapement of income, then it is sufficient compliance of law u/s. 151. As long as reasons recorded and reason to believe is sustainable, then it is not necessary that the approving authority has to again give his detailed reasons for approving reasons recorded. Thus, approval given by the Ld. PCIT Central Circle-3, Mumbai u/s 151 is in accordance with law and consequently, the ground taken by the ld. Counsel is rejected. Unexplained deposits - No arguments have been placed by the ld. Counsel and he fairly admitted that no explanation or evidences have been provided by the assessee to explain the deposits or source of deposits or whereabouts of the dubious companies from where money has come before the ld. AO or ld. CIT (A). Even at this stage of second appeal nothing has been filed or explained about the deposits, except for raising various legal issues and grounds which we have rejected. Accordingly, the addition made by the AO is confirmed. Assessee appeal dismissed.

Summary

Issues Involved:

1. Validity of reopening the assessment under Section 148.
2. Opportunity to the appellant before passing the order.
3. Confirmation of addition as unexplained cash credits under Section 68.
4. Issuance of statutory notice for change in incumbency under Section 129.
5. Jurisdictional issues under Sections 120, 124, and 127.
6. Satisfaction derived by the Assessing Officer (AO) and issuance of notice under Section 148.
7. Validity of sanction for the notice under Section 151.
8. Issuance and service of notice within the limitation period under Section 149.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 148:
The assessee challenged the reopening of the assessment, arguing that the notice under Section 148 was issued without tangible material evidence, relying solely on information from the DDIT (Investigation). The tribunal found that the reopening was based on substantial information regarding unexplained credits in the assessee's bank account, which justified the AO's belief that income had escaped assessment. The tribunal upheld the reopening as valid, noting that the AO had followed due process in issuing the notice within the prescribed time limit.

2. Opportunity to the Appellant Before Passing the Order:
The assessee contended that the CIT(A) passed the order without providing a proper opportunity to present their case. The tribunal observed that multiple opportunities were given to the assessee to explain the source of the deposits, but the assessee failed to provide any evidence or explanation. Therefore, the tribunal found no merit in the claim of lack of opportunity.

3. Confirmation of Addition as Unexplained Cash Credits under Section 68:
The assessee challenged the addition of Rs. 18,16,58,398/- as unexplained cash credits. The tribunal noted that the assessee did not furnish any explanation or evidence regarding the source of the deposits. Consequently, the tribunal upheld the addition under Section 68, as the assessee failed to discharge the burden of proof regarding the identity, creditworthiness, and genuineness of the transactions.

4. Issuance of Statutory Notice for Change in Incumbency under Section 129:
The assessee argued that the AO failed to issue a statutory notice informing the change in incumbency. The tribunal found this argument baseless, as there was no change in the incumbent AO, and the jurisdiction remained with the same authority throughout the proceedings.

5. Jurisdictional Issues under Sections 120, 124, and 127:
The assessee raised issues regarding the jurisdiction of the AO. The tribunal clarified that the jurisdiction was correctly vested with the Central Circle-6(4), Mumbai, and there was no change in jurisdiction affecting the case. The tribunal dismissed the jurisdictional challenge as unfounded.

6. Satisfaction Derived by the AO and Issuance of Notice under Section 148:
The assessee questioned the satisfaction derived by the AO, arguing it was based on borrowed satisfaction without independent inquiry. The tribunal found that the AO had sufficient information from the DDIT (Investigation) and had given the assessee opportunities to explain the deposits before issuing the notice. The tribunal held that the AO's satisfaction was justified and the notice was validly issued.

7. Validity of Sanction for the Notice under Section 151:
The assessee contended that the sanction for the notice under Section 151 was mechanical. The tribunal observed that the sanctioning authority had reviewed the reasons recorded by the AO, which were based on tangible material indicating escapement of income. The tribunal upheld the sanction as valid and in compliance with the law.

8. Issuance and Service of Notice within the Limitation Period under Section 149:
The assessee argued that the notice under Section 148 was communicated after the expiry of the limitation period. The tribunal examined the evidence and concluded that the notice was issued on 31/03/2017, within the time limit prescribed under Section 149. The tribunal emphasized that the statute requires the notice to be issued within the limitation period, and service is a condition precedent for assessment, not for jurisdiction. The tribunal dismissed the objection regarding the timing of the notice.

In conclusion, the tribunal dismissed the appeal, affirming the validity of the reopening of the assessment, the addition under Section 68, and the procedural compliance by the revenue authorities.