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TMI Blog2018 (5) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of the companies is prima facie not sustainable because when the property in question was already pledged with the bank as collateral security by the Director in her individual capacity, there is no legal ground with the bank to insist upon for transferring the property in the name of the companies. Rather collateral security given by the Director of the company in individual capacity is a potent security with the bank than the properly in the name of the company. So, this plea also is an after-thought and as such, the entire arrangement between the assessee and both the companies falls within the mischief of provisions contained u/s 2(22)(e) of the Act. - Decided in favour of revenue Notice u/s 143 validity - AO jurisdiction to pass the assessment order for want of issuance of valid notice u/s 143 (2) - whether mere proving of dispatch is not enough to prove the service of notice on the assessee which is a mandatory requirement - Held that:- No doubt, the ACIT, Circle 46 (1) who has issued the notice u/s 143 (2) dated 12.08.2009 has no jurisdiction and subsequently, the case was transferred to ACIT, Circle 1 (1), New Delhi before whom the assessee continued to attend the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t outstanding as on 31.03.2008 which was reflected in sundry debtors and from the audited account of M/s. Karishma Machine Tools, it was noticed by the AO from Annexure-1 to balance sheet that loan given to the assessee, Mrs. Monica Sehgal for ₹ 31,00,000/- and the balance sheet of M/s. Karishma Machine Tools also shows reserve of ₹ 3,42,23,672.26. After issuing a show-cause notice and being dis-satisfied with the reply filed by the assessee dated 06.12.2010, AO proceeded to invoke the provisions contained under section 2(22)(e) of the Income-tax Act, 1961 (for short 'the Act') and treated the amount of ₹ 97,52,217/- and ₹ 31,00,000/- (totaling ₹ 1,28,52,217/-) taken as advance from M/s. Alpex Exports Pvt. Ltd. & M/s. Karishma Machine Tools respectively as deemed dividend and thereby made an addition to the total income of the assessee. 5. Assessee carried the matter before the ld. CIT (A) by way of an appeal who has deleted the addition on merit but decided the ground of lack of jurisdiction with AO to pass assessment order against the assessee, by partly allowing the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by filing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chine Tools respectively as earnest money for sale of the build-up portion measuring 192 sq.mtrs. and First Floor, B-79, Shivalik, near Malviya Nagar, New Delhi, however this contention has not been accepted by the AO who has treated the aforesaid advances taken by the assessee from M/s. Alpex Exports Pvt. Ltd. & M/s. Karishma Machine Tools as deemed dividend u/s 2(22)(e) of the Act. 9. In the backdrop of the aforesaid facts and circumstances of the case, order passed by the Revenue authorities below and arguments addressed by the ld. AR to the parties, the sole question arises for determination in this case is:- "as to whether amount of ₹ 1,28,52,217/- was actually taken as earnest money by the assessee for sale of built up property situated at B-79, Shivalik, near Malviya Nagar, New Delhi from M/s. Alpex Exports Pvt. Ltd. & M/s. Karishma Machine Tools or it was taken as advance for the purpose of investment with RRB Master Securities Limited?" 10. The assessee has come up with a specific plea that she has taken an amount of ₹ 1,28,52,217/- from M/s. Alpex Exports Pvt. Ltd. & M/s. Karishma Machine Tools as earnest money for sale of her build up property to M/s. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for office use and actually it was in use for this purpose when Agreement to Sell dated 20.12.2007 was executed between the parties. 14. Furthermore, case set up by the assessee that the advances were taken as earnest money for the sale of office premises to M/s. Alpex Exports Pvt. Ltd. & M/s. Karishma Machine Tools fell flat when both the aforesaid companies have not shown the amount of ₹ 1,28,52,217/- having been paid to the assessee as "advance given as earnest money" for purchase of office premises by virtue of the Agreement to Sell dated 20.12.2007. Rather these loans have been shown as other liabilities. Had there been any bonafide on the part of assessee to sell the property in question by making use of the advance of ₹ 1,28,52,217/- as earnest money the books of account of both the companies would have contained entries showing actual purpose of the advance. 15. Furthermore, perusal of the Agreement to Sell in question dated 20.12.2007 shows that a common clause that "in case, second party, M/s. Alpex Exports Pvt. Ltd. & M/s. Karishma Machine Tools failed to get the sale deed executed, earnest money paid to the assessee shall be forfeited whereas first part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the bank than the properly in the name of the company. So, this plea also is an after-thought and as such, the entire arrangement between the assessee and both the companies falls within the mischief of provisions contained u/s 2(22)(e) of the Act. So, the assessee has clearly deprived the company from the benefits of funds of ₹ 1,28,52,217/- taken from both the companies which have been used for the purpose of investment in the mutual fund. 20. In view of what has been discussed above, we are of the considered view that the ld. CIT (A) has erred in deleting the addition of ₹ 1,28,52,217/-. Consequently, impugned order passed by the ld. CIT (A) is not sustainable in the eyes of law hence reversed and assessment order passed by the AO is hereby restored. So, Ground No.1 of the Revenue is determined in favour of the Revenue. CROSS OBJECTION FILED BY THE ASSESSEE GROUNDS NO.1 & 2 21. The ld. AR for the assessee challenging the impugned order contended inter alia that the AO had no jurisdiction to pass the assessment order for want of issuance of valid notice u/s 143 (2) of the Act; that mere proving of dispatch is not enough to prove the service of notice on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second notice dated 06.08.2010 was issued by the ACIT, Circle 1 (1), New Delhi. 24. Perusal of the copy of the notice issued u/s 143 (2) of the Act dated 12.08.2009 placed on file by the ld. DR supported with copy of register showing speed post booking list shows that the notice was issued to the assessee on 12.08.2009 by ACIT, Circle 46 (1), New Delhi. Jurisdictional AO of companies of assessee is ACIT, Circle 46 (1) and jurisdictional AO of assessee in individual capacity, who is also director of the two companies, is ACIT, Circle 1 (1), New Delhi. It is the case of the assessee that since ACIT, Circle 46 (1) has no jurisdiction whereas the second notice dated 06.08.2010 issued by the jurisdictional ACIT was beyond statutory period, the assessment order is liable to be quashed. 25. However, when we examine the provisions contained u/s 124 (3)(a) the assessee is not entitled to question the jurisdiction of the AO after an expiry of one month from the date on which she was served with notice u/s 142 (1), 142 (2) and 143 (2) order after the completion of the assessment, whichever is earlier. For facility of reference, provisions contained u/s 124(3)(a) are reproduced as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout it. (Kiran Singh v. Chaman Paswan, AIR 1954 SC 340)" 29. So, in this case, it is not the case of the assessee that the ACIT who has passed the assessment order was having no jurisdiction over the subject matter of the case rather he has questioned the territorial jurisdiction for want of issuance of a notice issued u/s 143 (2) which is a mere irregularity and the assessment cannot be set aside on this ground as has been held by Hon'ble Apex Court in Kiran Singh vs. Chaman Paswan (supra). Moreover, no prejudice is shown to have been caused by the assessee for want of issuance of statutory notice issued by ACIT having no territorial jurisdiction rather defended the proceedings before AO without raising any objection. 30. Moreover, the assessee has not brought on record iota of material to prove if any prejudice has been caused to her due to issuance of the notice u/s 143 (2) by ACIT, Circle 46(1) having no jurisdiction. Moreover, jurisdictional error in this case is due to the fact that the assessee being a Director of a company is having a separate jurisdiction and the assessee as an individual tax payee is a separate jurisdiction believing no prejudice is being caused to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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