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TMI Blog2021 (11) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... ion either regarding the fact of return having been filed by the assessee nor any other information to the effect that the source of the cash deposits was unexplained. No inquiries were independently conducted by the AO regarding the source of cash deposits, which would have surely assisted in the formation of belief of escapement of income with regard to the same. The reasons recorded therefore do not justify the assumption of jurisdiction by the AO to reopen the case of the assessee u/s 147 of the Act. The order passed u/s 147 of the Act therefore is clearly not a valid order in the eyes of law. Collateral proceedings on the said order, u/s 263 of the Act, are therefore, we agree, not sustainable in law. The order passed by the Ld.PCIT u/s 263 of the Act is accordingly set aside. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... t of income were based on incorrect facts and demonstrated that even the AO was unaware of the basic facts and showed non-application of mind by the AO while recording the reasons. That the satisfaction of formation of belief of escapement of income recorded by the AO was not based on any tangible material. The reasons recorded for reopening the case of the assessee, copy of which was placed before us at Paper Book page Nos.15 to 17, was referred to while making the aforesaid contentions. The contents of the reason are as under: '1. From perusal of details available in ITS, it is seen that return of income for the Assessment Year 2011-12 has not been filed by the assessee. 2. As per information available in NMS, Cycle-2, the assessee has deposited cash of ₹ 10,00,000/- or in more in the Saving Bank Accounts With Punjab National Bank And HDFC Bank during the financial year 2010-11 relevant to the Assessment Year 2011-12. 3. On verification from ITS, it is seen that the assessee has made huge cash deposits in his. bank accounts during the financial year 2010-11 as per details hereunder: - - Punjab National Bank : ₹ 2,29,85,000/- - HDFC Bank : ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agrave; vis the reason being based on incorrect facts or non application of mind was with regard to his finding at para-1 of the reasons that no return had been filed by the assessee, while at para-4 he recorded the return having been filed and subsequently at para-8 noted that though the return of income had not been filed by the assessee as per the office record, however, even considering the acknowledgement of return filed being true, the same having not been assessed, the provisions of section 151(2) of the Act come into picture. The Ld.Counsel for the assessee pointed out that the fact of the matter is that the assessee had filed return of income while the AO had based his premise of escapement of income on the incorrect fact that no return had been filed by the assessee and, therefore, the huge cash deposits amounting to ₹ 4.17 crores in the bank account of the assessee tantamounted to undisclosed income. Ld.Counsel for the assessee further contended that after having so noted , the AO stated at para 4 that the return had been filed, demonstrating that the AO himself was unsure of the fact and thereafter at para 8 recording the reasons for escapement of income, both in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osits. It was stated that the jurisdiction lay only with regard to non filer assesses. Ld.Counsel for the assessee stated that in the present case the assessee had filed return of income, which was duly intimated to the AO, NMS, who had uploaded the information and which finds mention in the reasons recorded also at para Ld.Counsel contended that since the assessee was not a non filer therefore he was not required to offer any explanation to the AO, NMS. Therefore, he contended that the AO of the assessee, while recording reasons, could not have derived any strength or benefit from the non furnishing of any explanation by the assessee to the AO, NMS. That in any case the satisfaction of escapement of income has to be of the AO of the assessee and not a borrowed satisfaction. 10. Ld.DR agreed with the factual explanation of the assessee regarding the NMS system. 11. We have heard both the parties at length and carefully perused the documents as also the case laws referred to before us. 12. The assessee has challenged the validity of the impugned order before us passed u/s 263 of the Act, contending that the order sought to be revised by the PCIT, passed u/s 147 of the Act, was it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd go to the root of the matter, therefore before dealing with any other issue, we shall first deal with all above three issues one by one, as under: 8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s 263: The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s 143(3) in the appellate proceedings taken up for challenging the order passed u/s 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as 'primary proceedings'. These are, in effect, basic / foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as 'collateral proceedings' in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the 'primary p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional aspects of the order passed in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs. 8.2. In a matter that came up before Hon'ble Supreme Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors., [1955] 1 5CR 117 the facts were that the appellant in that case had undervalued the suit at ₹ 2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Registry raised the objection as to valuation under Section 11. The value of the appeal was fixed at ₹ 9,980. A contention then was raised by the plaintiff in the High Court that on account of the valuation fixed by the High Court the appeal against the decree of the court of the Subordinate Judge did not lie to the District Court, but to the High Court and on that account the decree of the District Court was a nullity. Alternatively, it was contended that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of 2007) in its order dt 17th April, 2015 wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution. 8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh & Ors. v. Chaman Paswan & Ors, supra were reiterated by the Apex Court in the cases of Superintendent of Taxes vs Onkarmal Nathmal Trust (AIR 1975 SC 2065) and Dasa Muni Reddy v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or reassess a person can never be waived or created by consent. This decision shows that the basic principle recognized in Kiran Singh (supra) is applicable even to revenue statutes such as the Income Tax Act. Dasa Muni Reddy (supra) is a judgment where the principle of 'coram non judice' was applied to rent control law. It was held that neither the rule of estoppel nor the principle of res ludicata can confer the Court jurisdiction where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenues plea. The assessee thereafter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was under challenge. According to Hon'ble Gujarat High Court, the rule of res judicata cannot be invoked where the question involved is the competence of the Court to assume jurisdiction, either pecuniary or territorial or over the subject matter of the dispute. Hon'ble High Court further held that since neither consent nor waiver can confer jurisdiction upon the Assessing Officer where it did not exist, no importance could be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Doshi, supra and Hon'ble Bombay High Court in the case of Jainaravan Babulal vs CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty. 8.9. We also derive support from another judgement of Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd vs CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate re- assessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in earlier proceedings before the Assessing Officer or in the earlier appeal. 8.10. Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s 263 on the ground that the impugned assessment order was non est and we hold accordingly." 15. Ld.DR was unable to point out any decision holding to the contrary. Therefore the objection of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his fact by the ITO, Ward-4. The AO, in truth, was clueless and uncertain of the fact whether return of income was filed by the assessee or not. 20. Further, even the assessee not responding to inquiries conducted by the AO, NMS, i.e. ITO Ward-4 regarding the cash deposits, we find, is of no relevance for forming opinion of the cash deposits being unexplained, since as rightly pointed out by the Ld.Counsel for the assessee, it is the AO of the assessee whose satisfaction is crucial for reopening and it cannot be a borrowed satisfaction. Also, as pointed out to us by the Ld.Counsel for the assessee and not controverted by the DR, the jurisdiction of the AO, NMS, lay with regard to non-filer assessees only, while the assessee had duly communicated the fact of his having filed his return of income for the impugned year. This fact, we find, stands corroborated by the contents of the reasons itself which note that the ITO, Ward-4, who had jurisdiction in the NMS system, had noted in his sheet that the assessee had filed return for assessment year 2011-12 i.e. the impugned year. Therefore the AO, NMS, had no jurisdiction over the assessee and the assessee was therefore not required to g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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