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TMI Blog2013 (9) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not be open to the assessee to object that the notice was not served upon him or was not served in time or was served upon him in an improper manner. However, an exception to the aforesaid presumption has been made in a case where such objection has been raised before completion of assessment or reassessment. The provision has been made effective from 1.4.2008 and therefore, shall apply to all pending proceedings - It is not disputed that the assessee had appeared before the AO on various dates and participated in the reassessment proceedings before the finalization and no objection regarding issuance and service of notice under Section 143(2) was raised before the AO - Following decision of CIT vs. Ram Narain Bansal [2011 (7) TMI 527 - Punjab and Haryana High Court] - Decided against assessee. Unexplained investment u/s 69 - Amount deposited to bank - Benami transaction - Held that:- assessee substantiating his bonafides had duly brought it to the notice of the various authorities before whom the proceedings had been going on, that the said misusing of the 'Bank account' in itself stood substantiated from the very fact that a perusal of the 'Withdrawals' effected from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Asr)/2010 for the A.Y. 2000-01: "1. That the order of the CIT(A) is against the law and facts of the case. 2. That the CIT(A) had gravely erred in law in filing to appreciate that the A.O. had wrongly assumed jurisdiction and initiated proceedings u/s 147 of the Act in the hands of the assessee. 3. That the CIT(A) had gravely erred in law in filing to appreciate the facts of the case in light of the settled position of law and therein grossly erred in sustaining the addition of Rs.4,05,000/- made by the A.O. in the hands of the assessee. 4. That the ld. CIT(A) brushing aside the material available on record as well as the duly substantiated submissions of the assessee, therein most arbitrarily drew adverse inferences in the hands of the assessee and sustained the addition of Rs.4,05,000/- in the hands of the assessee. 5. That without prejudice to the aforesaid even otherwise the CIT(A) gravely erred in law and facts of the case and failed to appreciate that no addition as regards the impugned deposit aggregating to an amount of Rs.4,05,000/- in the Current account of the assessees bank account made by the AO u/s 69A of the Act could not sustained in the eyes of law. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment framed by the AO, not on the basis of any concrete material made available on record, but rather by resorting to mere assumptions, presumptions and surmises. 8 Any other ground of appeal as may be allowed to be raised at the time of hearing of the appeal." 4. The assessee has raised following additional grounds of appeal in both the years, which are reproduced as under: "1. That the A.O. has grossly erred in law and facts of the case in assuming jurisdiction and framing assessment u/ss. 148/143(3) of the Income Tax Act, 1961 without obtaining the sanction of the appropriate authority as contemplated u/s 151(2) while issuing Notice u/s 148 of the Act. 2. That the A.O. has gravely erred in law and facts of the case by framing assessment u/ss. 148/143(3) of the Income Tax Act, 1961 without issuing a notice u/s 143(2) of the Act." 5. The Ld. counsel for the assessee, Mr. Ravish Sud, Advocate submitted that the grounds of appeal involved purely a question of law on the basis of facts available on record and therefore, in view of the decision of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383(SC), additional grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. Money was carried from India to Dubai and remitted back into the Bank a/c of M/s. Meghna Impex with Oriental Bank of Commerce, Garha Road, Jalandhar as the export proceeds. As per statement of Sh. Satbir Singh before the Anti Smuggling Wing of the Customs Department, Amritsar some Bank cheque books of both the banks i.e. Oriental Bank of Commerce, Garha Road, Jalandhar and State Bank of Bikaner Jaipur, Adda Bastian, Jalandhar were got signed from him by Sh. Gutrkirpal Singh and Sh. Ashok Kumar of ATM International Jalandhar as the whole show was arranged by the assessee alongwith Sh. Ashok Kumar of ATM International. A perusal of current a/c no.681 with Oriental Bank of Commerce, Garha Road, Jalandhar of M/s. Meghna Impex (placed on filed) reveals that an amount of Rs.1,27,75,000/- has come into the Bank a/c No.328 of M/s. Supreme Industries, Jalandhar through clearing with State Bank of Bikaner Jaipur, Adda Bastian, Jalandhar. This firm M/s. Supreme Industries, Jalandhar is the proprietary concern of Sh. Gurkirpal Singh. During the course of assessment proceedings in the case of Sh. Satbir Singh, prop M/s. Meghna Impex statement of Sh.Satbir Singh the prop. Was also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of statement of Sh.Ashok Kumar and also of the statement of Sh. Vijay Madan, Customs Agent. Later on Sh.Ashok Kumar Sh. Vijay Madan retracted from their statement before the ACIT, Circle-II, Jalandhar. As such the statement before the Customs Department has no evidentiary value. 4. As regards the transfer of funds to the bank account of the assessee and subsequent withdrawals thereof, the assessee has already filed the complaint with the Police Station regarding the theft of his cheque books of M/s. Supreme Industries, Basti Sheikh, Jalandhar with State Bank of Bikaner Jaipur, Adda Bastian, Jalandhar. 5. That the stolen cheque books of the assessee was misused by some body else and not the assessee. 6. That even after the period of six years the Customs Department has not made any assessment against the assessee. 7. The deposit of Rs.1,27,75,000/- should be assessed in the hands of partnership firm or AOP and not in the hand of the assessee.\ These objections of the assessee were disposed off by this office as under: 1. It is incorrect to say that the proceedings u/s 147 have been initiated merely on the basis of information form the Customs Authority . Statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A). The revenue is before the Hon'ble ITAT, Amritsar. 4 When the Police Department has not been able to solve the problem of theft of cheque book of Sh.Gurkirpal Sigh in a long span of about 7 years and find out the culprit how can the Income Tax Deptt. Can take cognizance of such a complaint which still awaits decision when a period of more than six years has elapsed. 5. The Department has not device like metal detector to trace out the culprit i.e. the alleged misuser of the cheque book and assess the income in his hands The funds have traveled from the bank account of M/s. Megan Impex with the Oriental Bank of Commerce to your account with State Bank of Bikaner Jaipur, Jalandhar. As such you are answerable to explain the source of these deposits amounting to Rs.1,27,75,000/-. 6. It states to Customs Department. Hence no comments. 7. The share of benefit/profit enjoyed by Sh. Ashok Kumar has been assessed in his hands by the ACIT, Cir.II, Jalandhar. This amount of Rs. 1,27,75,000/- has gone into your bank a/c and you are individually responsible to explain the same. As no explanation regarding this deposit in your account has been furnished by you, it is to be assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been exported. Further, even though money was not actually received in respect of several export bills, bank certificates had been forged to show realization to claim DEPB benefits of Rs.1.85 crores, which had been sold to others. It was stated that M/s. Meghna Impex had been floated in the name of Sh. Satbir Singh, an employee of Sh. Pavitar Singh, CA by Sh. Ashok Kumar alias Luck of M/s. ATM International. Sh. Gurkirpal Singh of M/s. Supreme Industries and Sh. Pavitar Singh, CA. It was also informed that Sh. Satbir Singh had stated before the Customs Authorities that the real beneficiaries were Sh. Ashok Kumar and Sh. Gurkirpal Singh. Substantial money to the tune of Rs.1.08 crores was said to have been transferred from the bank account of M/s. Meghna Impex to the bank account of M/s. Supreme Inds. This was said to have been managed by obtaining blank signed cheques of M/s. Meghna Impex from Sh. Sabir Singh and withdrawing money from the account of M/s. Meghna Impex. Sh. Ashok Kumar had stated before the Customs Authorities that export proceeds were arranged through Hawala channels from India to Dubai and remitted back into the account of Meghna Impex as export proceeds. The bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 29.03.2007. He further argued that the ld. counsel for the assessee should avoid taking such grounds without consulting the record of the assessment. 15.1 As regards ground No.2, the Ld. DR argued that the assessee has not raised any objection with regard to the issuance of notice u/s 143(2) of the Act at the commencement of the assessment proceedings, since the jurisdiction is determinable at the commencement of the proceedings and not at the conclusion of the said proceedings. He relied upon the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Ram Narain Bansal dated 13th July, 2011 (2011) 202 Taxman 213 where it has been decided that the assessee having participated in the reassessment proceedings upto its conclusion without raising any objection about issue and service of notice u/s 143(2), the ld. CIT(A) and the Tribunal were not justified in holding assessment invalid on that score. In the present case, the assessee having participated in the reassessment proceedings without raising any objection with regard to non-issuance of notice u/s 143(2) of the Act and therefore, such objection cannot be raised before the Tribunal and the same is liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction is determinable at the commencement and not at the conclusion of the proceedings and this aspect has been very clearly noticed by the Hon'ble Supreme Court in the case of M.L. Sethi vs. R.P. Kapur reported in (1972) 2 SCC 427 in para 12 at pages 434 435 which for the sake of convenience is reproduced as under: The "jurisdiction" is a verbal coat of many colours Jurisdiction originally seems to have had the meaning which Lord Reid ascribed to it in Anisminic Ltd. v. Foreign Compensation omission, namely, the entitlement "to enter upon the enquiry in question". If there was an entitlement to enter upon an enquiry into the question, been any subsequent error could only be regarded as an error within the jurisdiction. The best known formulation of this theory is that made by Lord Darman in R. v. Bolton. He said that the question of jurisdiction is determinable at the commencement, not at the conclusion of the enquiry. In Anisminic Ltd. case (supra), Lord Reid said: "But there are many cases where, although the tribunal had jurisdiction to enter on the enquiry it has done or failed to do something in the course of the enquiry which is of such a nature that its dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the, case leaves a Court or Tribunal with virtually no margin of legal error. Whether there is excess of jurisdiction or merely error within jurisdiction can be determined only by construing the empowering statute, which will, give little guidance. It is really a question of how much latitude the Court is prepared to allow. in the end it can only be a value judgment (see H.W.R. Wade, "Constitutional and Administrative Aspects of the Anismanic case", Law Quarterly Review, Vol. 85, 1969, p. 198). Why is it that a wrong decision on a question of limitation or res judicata 'was treated as a jurisdictional error and liable to be interfered with in revision ? It is a it difficult to understand how an erroneous decision on a question of limitation or res judicata would oust the jurisdiction of the Court in the primitive sense of the term and render the decision or a decree embodying the decision a nullity liable to collateral attack. The reason can only be that the error of law was considered as vital by the Court. And there is no yardstick to determine the magnitude of the error other than the opinion of the Court." 17.5. The aforesaid principle of law with greatest respect we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to jurisdiction cannot be waived, for consent cannot give a court jurisdiction where there is none. Even if there is inherent jurisdiction, certain provisions cannot be waived. Maxwell in his book "On the (1) (1908) I.L.R. 35 Cal. 61, 72. (2) [1841] 9 Dowl. 487. 1012. Interpretation of Statutes", 11th Edn., at p. 375, describes the rule thus: "Another maxim which sanctions the non- observance of a statutory provision is that cuilibet licet renuntiare juri pro se introducto. Everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy." The same rule is restated in "Craies on Statute Law", 6th Edn., at p. 269, thus : "As a general rule, the conditions imposed by statutes which authorise legal proceedings are treated as being indispensable to giving the court jurisdiction. But if it appears that the statutory conditions were inserted by the legislature simply for the security or benefit of the parties to the action themselves, and that no public interests are involved, such conditions will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed in the proviso to s. 143(2) of the Act. Where the legislature intended to exclude certain provisions from the ambit of s. 158BC(b) it has done so specifically. Thus, when s. 158BC(b) specifically refers to [sic-s. 143(2)] applicability of the proviso thereto cannot be excluded. We may also notice here itself that the clarification given by CBDT in its Circular No. 717. dt. 14th Aug.. 1995, has a binding effect on the Department, but not on the Court. This circular clarifies the requirement of law in respect of service of notice under sub-s. (2) of s. 143 of the Act. Accordingly, we conclude even for the purpose of Chapter XIV-B of the Act. for the determination of undisclosed income for a block period under the provisions of s. 158BC. the provisions of s. 142 and sub-ss. (2) and (3) of s. 143 arc applicable and no assessment could be made without issuing notice under s. 143(2) of the Act. However, it is contended by Sri Shekhar. learned counsel for the Department that in view of the expression "So far as may be" in s. 153BC(b), the issue of notice is not mandatory but optional and are to be applied to the extent practicable. In support of that contention, the learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Bansal (supra) is reproduced hereinbelow for the sake of convenience as under: 9. Learned counsel for the Revenue submitted that notice under Section 148 of the Act was issued to the assessee which was duly served. In pursuance to the said notice, the assessee appeared before the assessing authority and participated in the re-assessment proceedings on 30.11.2007, 6.12.2007, 12.12.2007, 13.12.2007, 18.12.2007, 24.12.2007, 27.12.2007, 28.12.2007 and 31.12.2007 and also cross-examined the witnesses who were summoned and their statements were recorded. The counsel drew support from a judgment of the Kerala High Court in K.J. Thomas vs. CIT (2008) 301 ITR 301 to submit that non-service of notice under Section 143 (2) of the Act was not fatal to re-assessment proceedings. Reference was made to Section 292 of the Act and according to the counsel the said provisions were applicable to all pending proceedings. Reliance was also placed on a judgment of this Court in Commissioner of Income Tax, Bathinda v. M/s Panchvati Motors (P) Ltd. (ITA 292 of 2008) decided on 3.5.2011. 10. We find considerable force in the submission of the learned counsel. The Kerala High Court in K.J.Thomas's cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect taxes contained in Finance Act, 2008. Clause 42.7 (at page 86 of the report) is relevant which relates to applicability of this provision and reads thus: "42.7 Applicability - This amendment has been made applicable with effect from 1st April, 2008. This means that the provision of new-section 292 shall apply in all proceedings which are pending on 1st April, 2008." 12. It is not disputed that the assessee had appeared before the assessing officer on various dates and participated in the re- assessment proceedings before the finalization and no objection regarding issuance and service of notice under Section 143(2) of the Act was raised before the assessing officer. The CIT(A) and the Tribunal were, thus, in error in nullifying the re-assessment proceedings and declaring the re-assessment order to be invalid. 13. In view of the above, the substantial question of law is answered in favour of the Revenue and against the assessee. Consequently, the matter is remanded to the Tribunal for decision afresh on merits in accordance with law. " 20. Accordingly, under the aforesaid facts and circumstances of the case and the decisions of the Hon'ble Courts referred to hereinabov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons best known to them of which the assessee most unfortunately remained ignorant, but as soon as he learnt of the said theft and misuse of the cheque books, he immediately lodged a complaint with the Police Station, bringing the entire factual position on record of the said "Police authorities. In this regard, it would be very relevant and pertinent to point out that the assessee substantiating his bonafides had duly brought it to the notice of the various authorities before whom the proceedings had been going on, that the said misusing of the 'Bank account' in itself stood substantiated from the very fact that a perusal of the 'Withdrawals' effected from the said account, as a result stands gathered on a perusal of the 'Cheques' vide which withdrawals had been made from the said 'Bank account' of the assessee, in itself reveals that there was not even a 'Solitary situation', wherein any 'withdrawal' pertaining to the impugned amounts so credited to the bank a/c on the assessee was ever carried out by the assessee and the said factual matrix had been appreciated by the other such authorities before whom the proceedings as regards the aforesaid issue are going on. Thus, to be brie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on record and had wrongly been inferred by the A.O. for the reason that as pointed out hereinabove the said Sh.Satbir Singh had been booked by the "Custom Authorities' and till date neither any order acquitting him nor any order convicting the assessee had been passed by the said 'Custom authorities'. Thus, to be brief and explicit, the information forwarded by the 'Custom Authorities' had not been appreciated in entirety by the A.O. while drawing adverse inference in the hands of the present assessee. That without prejudice to the fact that the source of deposit in the bank a/c of the assessee stands duly explained to be out of the A/c No.681 of Meghna Impex, however, even otherwise, as stands revealed on perusal of A/c No.681 of Meghna Impex the amounts as stands credited in the said A/c 681 only represents the 'Export sale proceeds'. Thus, in light of the aforesaid factual position, even otherwise no adverse inference, on the basis of the source of the source is liable to be drawn in the hands of the assessee. Though no admitting and without prejudice to the aforesaid, it even otherwise be submitted that in light of the findings of the AO that all the amounts credited in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. Section 69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the [Assessing] Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. Thus, in the light of the settled position of law as discussed hereinabove, the addition of Rs.1,27,75,000/- so made u/s 69A of the Act, even, otherwise cannot be sustained in the eyes of law. 24. In the remand report, the AO vide para 1.6 has submitted that Meghna Impex is dummy co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits in the bank account i.e. nature of credit entries and not debit entries. The credit entries in the bank account of Megna Impex are out of fraudulent DEPBs which were sold by the concern to others for consideration and later on also declared ab initio void and cancelled by the Director General of Foreign Trade, Ludhaina." 25. From the perusal of the report of the A.O. it is evident that the AO accepted that the Meghna Impex was floated by three persons i.e. Sh.Gurkirpal Singh, Sh. Ashok Kumar and Sh. Pavitar Singh,CA and bank account was opened in the name of Sh. Satbir Singh. It is also admitted in the report that the said bank account might have been misused by some thief for the purpose of making withdrawals from bank account. Further, it was admitted that credit entries in the bank account of Megna Impex are out of fraudulent DEPBs which were sold by the concern to others for consideration and later on also declared ab initio void and cancelled by the Director General of Foreign Trade, Ludhiana. From the said report, it is evident that original account of M/s. Megna Impex is the one where the deposits were fraudulent or otherwise taken but not by one person but by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the authorities below. As regards the deposits in the said account which are from the account of Meghna Impex which are stated to have been owned by the three persons then no assessment can be made on the assessee, initially ignoring the three persons as association of persons. Thirdly, when the said DEPBs which are stated to have been procured fraudulently from the Director General of Foreign Trade, Ludhiana, who has declared that the said DEPBs are void ab initio and has levied penalty of Rs. 2 crore is also on record. In this regard. 33 consignments issued by the Oriental Bank of Commerce and remittance was not received in 28 cases and the balance 5 consignments were remittance, which were realized through forgery and substitution of export documents. The concern M/s. Meghna Impex has availed DEPBs by giving misleading declarations and on the basis of forged bank certificate of exports and realisation by substituting shipping bills and the said DEPBs with regard to the five consignments were cancelled by Director General of Foreign Trade, Ludhiana declaring them void ab initio and penalty of Rs.2 crores was imposed. The said facts are as per report of the A.O. available in par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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