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TMI Blog2024 (10) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... g the addition has not invoked or applied any provisions of law. AO has not stated under what provision of law he has made the addition and under what head whether, under business or trading income, agriculture income, capital gain or under section 48, 56 or under section 68 or 69. Thus the addition so made without any provision of Act is also against the law and liable to be deleted on this ground alone. Without invoking the provision of Act/law, the AO cannot make the addition. As the recorded reason/impugned assessment order is silent under which provision of the Act the addition is sought to be made. It is well settled that the reasons cannot be supplemented by assessment order or affidavit. Unless the assessee is put to the notice as to the exact contravention or provisions of law under which assessment or additions are sought to be made, the assessee cannot defend his case. Thus, addition made and sustained by the lower authorities deserves to be deleted. Therefore, allow the present appeal on merits as well. - Hon ble Shri Sandeep Gosain, JM For the Assessee : Shri Sarwan Kumar Gupta, Advocate Miss. Lakshita Deora, Advocate For the Revenue : Shri Gautam Singh Chaudhary, JC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and in this regard an application for seeking condonation of delay has been filed by the assessee. In support of the condonation application, the assessee has also filed an Affidavit which reads as under :- I, Prabhati Devi W/o Sh. Ram Sahai Meena Age-81years, R/o V.P. Daglav Post Surajpura, Tehshil District Dausa, Rajasthan 303303, do hereby solemnly affirm on oath as under: 1. That I am not a regular Income Tax Assesee and holding PAN CAHPPS1666E. 2. That an appeal is being filled by me before your honor for A.Y. 2011-12 by the delay about 2 Months and 19 days. Although actually there is no delay if following facts are being considered. 3. That we would like to submit that actually there is no delay in the appeal filling, as the I have not received the order physically. Still if your honor is of the view that the appeal is being filled with the delay. Then the reason of late filing was that the Notices as well as order was sent by the AO at the email ID: itrdausa108gmail.com and [email protected] this email was not of mine but some counsel through whom appeal was filed, who has not informed to us and escaped to view the email and it may be possible that he has not seen th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has not filed her return of income as her income was below the taxable limit. The assessee is not a regular income-tax assessee. The AO on the basis of information received, issued notice under section 148 on 27.03.2018 on the reason that On the basis of information received from ITO (I CI), Alwar vide letter No.157 dt.23.10.2017 along-with copy of registry dt. 29.10.2010, wherein it is stated that the assessee had jointly purchased an immovable property (land) at village Dholabas, Tehsil- Lalsot District Dausa by paying Rs. 49,00,000/- and stamp duty of Rs. 7,04,830/-. Whereas the DLC value of the property under consideration was Rs. 1,63,63,200/- for the purpose of charging stamp duty and other charges, thus the total investment of Rs. 56,04,830/-(Rs. 49,00,000/- +7,04,830/-) was made by the assessee jointly. As the assessee has purchased the property jointly therefore the share of the assessee comes to Rs. 28,02,415/-. Hence the source of the amount invested for purchasing of said property remained unverified, apparently the purchase of land was made out of undisclosed income and the assessee had not filed the ITR for A.Y. 2011-12. Therefore I have reason to believe that inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but it is silent so far as on its proof of duly served upon the assessee and the same notice was not received by the assessee within time as prescribed by law. Assessee has come to know about the said notice only on receiving the assessment order, all these proves that the notices have not been served upon the assessee. And it is settled legal position of law that the proper service of the notice u/s 148 on the assessee is mandatory, without service of notice the subsequent proceedings are invalid and illegal and liable to be dropped. Thus the assessment order u/s 144/147 is bad in law and deserved to be quashed as the mandatory condition for reopening of the assessment could not have been fulfilled. Proper service of the notice u/s 148 is mandatory condition upon the assessee but Ld. AO could not have been served the notice as issued u/s 148 admittedly as per record. Further, notice issued u/s 148 is primary condition of law to initiate the reassessment proceedings under section 147 could not have been served properly to the assessee appellant therefore mandatory condition could not have been fulfilled. The proper service of notice u/s 148 is a jurisdictional requirement that mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made attempt to serve notice under section 148 to appellant by registered post but it was not shown that either appellant refused to take service of notice or that appellant was not available at his residence or that there was no one willing to accept service on his behalf, service of notice could not be said to be properly effected and, therefore, assessment order passed u/s 147 based on service was also bad in law Held, yes (In favor of assessee). For taking any action u/s 148 a valid service of the notice is precondition. For reference kindly refer a direct decision of Shri Chetan Gupta vs. ACIT(2014) 160 TTJ 0009 (Del)For valid assumption of jurisdiction to frame a reassessment, a proper and valid service of notice u/s 148 on assessee is mandatory requirement violation thereof will result in quashing of the reassessment proceedings. Assessee has demonstrated that the notice was issued/sent at an address different than the one mentioned in his return of income. Department also admits that the notice was served not on assessee but on one Shri Ved Prakash who according to assessing officer is a responsible person working for the group entities of assessees family and this amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the satisfaction on reasons there is no date on signature of the Pr. CIT and JCIT hence it is not clear that when they signed on the reasons recorded by the ld. AO there is no date given by the ld. AO. How the approval of all the 12 different assessee s can be given in one documents, when all are the independent or separate assessee and reasons are different. Thus it all shows how the wrong and illegal manner has been adopted by all the authorities. On this preposition and issue kindly refer the decision of this Hon ble ITAT in the case of Sh. Satya Naraya Bairwa v/s ITO in ITA No. 867 869/Jp/2018 dt. 15.09.2021 Copy is enclosed, wherein under the same facts and circumstances the Hon ble ITAT has held that - 20. The ld. A/R has also drawn our attention on the approval of the Pr. CIT placed at page Nos. 7-8 of the paper book and also from the assessment record placed before us, we found that he has given one consolidated approval of 56 different assessee s in one shot through one letter dated 29.03.2016 which is even not signed by him but signed by ITO (T J), who is not a competent authority to give and signed the approval letter, which shows how the PR. CIT has acted in very fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not escaped any income because the assessee has never having the undisclosed or unexplained income. Which shows that there was no escapement of income by the assessee, as the assessee has not purchased the property during the year the same was purchased in the year 1999 by the family members who paid the consideration in the year 1999. Hence if there is neither the escapement of income by the assessee nor proved then the notice issued u/s 148 is invalid. 4. Re-assessment is based on borrowed satisfaction; The Ld. AO has issued notice u/s 148 on the basis of borrowed information from the Sub Registrar for valuation of the immovable property, without verifying the correctness of the information and therefore re-assessment proceedings is absolutely bad in law and without jurisdiction and further AO not recorded his satisfaction and re-assessment is based on borrowed satisfaction which was not sufficient to confer power on the AO to initiate reassessment proceedings against assessee. CIT vs. Shree Rajasthan Syntex Ltd. (2009)313 ITR 231 (Raj.) SLP dismissed (2009) 313 ITR (St.) 27 (SC); Sun. Pharmaceutical Industries Ltd. Vs. DY. CIT (2016)287 CTR (Del.) 621; The Impugned initiation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is an external source of material not forming part of reasons recorded Thus basic requirement of section 147 was not satisfied and the reassessment notices were quashed. [S. 143(1)] For the relevant assessment years, the returns filed by the assessee were processed under section 143(1). Subsequently, the AO issued notice under section 148 seeking to reopen the assessment on ground that on verification of details available on record, it was found that assessee had made bogus purchases and to that extent profit had escaped assessment from tax. The assessee filed its objections to the reopening of assessment. The AO passed an order rejecting the objections raised by the petitioner which showed that the reopening was based on material received from the DGIT (Inv.), Mumbai, pursuant to inquiries made by him (the DGIT). On writ filed by the petitioner against reassessment, the HC observed that the material on the basis of which the AO sought to assume jurisdiction under section 147 of the Act, was the information received from an external source viz., from the DGIT and not the material on record as reflected in the reasons recorded. Since the belief of the AO was not based upon the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer has to be processed and, on the basis, thereof an opinion has to be formed objectively before issuing notice under Section 148 of the Act to an assessee. In other words the information received from the investigation wing cannot be said to be tangible material per se without a further inquiry being undertaken failing which the decision of the Assessing Officer in issuing notice for reopening of assessment would be a result of borrowed satisfaction and notices would be as a result of assumption of jurisdiction. While the report of the Investigation Wing might have constituted material on the basis of which the Assessing Officer formed the reasons to believe, the process of arriving at such satisfaction could not be a mere repetition of the report of investigation wing. 89. In the assessee s case, the crucial link between the information made available to the Assessing Officer and the formation of belief was absent. The reasons to believe recorded were not reasons but only conclusions and a reproduction of the information received from the Director (Investigation). Hence it is nothing but a Borrowed satisfaction . 90. The AO, in the reasons recorded, discussed in details the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that under what provision the assessee liable to be taxed or penalized or under what provision his offence falls then how the addition can be made. On this preposition we also would like to draw your kind attention toward the recent decision of this Hon ble ITAT in the case of Arvind Kumar Nehra V/s ITO Ward 7(1), Jaipur 32/Jp/2024 dt 10.04.2024 where it has been held It is also noteworthy to mention from the entire conspectus of the case that the AO has also not invoked any provisions of IT Act while making the lump Sum addition of Rs. 50,00,000/- for cash deposits in the bank account during the Demonetization Period, Unsecured Loan capital introduced. Hence, in our view lump-sum addition cannot be made under these accounts. The AO must have referred the specific amount with specific details and documents which he has not provided and as to what basis lump sum addition has been made and also failed to mention that on which account and as to what amount of addition consists of. It is also noted that the AO has not stated under which provisions or section he has made the lump-sum addition either u/s 68 or 69 or 69A or trading or u/s 56 i.e. other sources. It may be worthwhile t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter No 157 dated 23.10.2017 along with copy of registry dated 29.10.2010 has issued notice u/s 148 of the income tax act 1961. 2.2 As we have already stated above that the assessee has not received any notice u/s 148 dated 27.03.2018. And also nor any notice u/s 142(1) and 144 of the Income tax Act 1961 dated 18.10.2018, 05.12.2018. Thus the assessee could not submit her reply before the ld. AO despite non services of notices the ld. AO passed the order u/s 144 of the Income tax Act 1961 by making an addition of Rs. 28.02.415/- as Income from alleged undisclosed sources under the head Income from other sources for the A.Y 2011-12. The reason for making addition by the ld. AO was the assessee s share of Rs. 28,02,415/- in purchase of property jointly with other persons namely Smt. Vimla Devi. 2.3 No any notice served upon the assessee: Further without serving the notices u/s 142(1), 144 or SCN no addition can be made in the entire assessment order the ld. AO has only stated that the notice issued but he has not brought any proof of service of notice and he has not stated that what recourses he has adopted for service of notice. Hence also the assessment order is illegal invalid and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause transfer of assets has already been taken place on dt. 25.05.1999 say A.Y 2000-2001. In support we had filled the copy of purchases agreement dated 25.05.1999(PB17-19) and copy of purchases registry dated 29.10.2010(PB 8-16) before the ld. CIT(A). However the ld. CIT(A) has wrongly stated that The sale agreement also states that the total consideration of Rs. 4,00,000/- was paid at the time of agreement in the year 1999. It is however, not clear how the payment is made i.e. whether in cash or by cheque. Moreover no evidence of payment of Rs. 4,00,000/- is furnished and the only aversion about the payment is in the agreement. As on perusal of the page 2 para 1 PB (PB 19) where it has been written that we the seller had received entire amount in cash from the purchasers and given the real physical possession before us ( और हम विक्रेता गणनी क्रेतागण से विक्रय धन की सम्पूर्ण राशि अप ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentionally and blindly ignored these very vital facts of the case and proceeded on their own guess work, assumption, presumption and suspicion and it is the settled legal position that no addition can be the basis of suspicion, assumptions and presumption. An allegation remains a mere allegation unless proved. Suspicion may be strong however cannot take the place of reality, are the settled principleskindly refer Dhakeshwari Cotton Mills 26 ITR 775 (SC) also refer R.B.N.J. Naidu v/s CIT 29 ITR 194 (Nag), Kanpur Steel Co. Ltd. v/s CIT 32 ITR 56 (All).Also refer CIT v/s KulwantRai 291 ITR 36( Del). In CIT v/s Shalimar Buildwell Pvt Ltd 86 CCH 250(All) it has been held that the AO made the addition merely on suspicion which was not desirable in the eye of law. Further in the income tax act nowhere given any prohibition that an agreement must be registered and payment made earlier shall not be accepted in want of the registration of the agreement. Here the matter of source and payment not of the registration of the documents. And the documents can be registered at any time. And in the income tax only condition of payment of full consideration and possession which had already been fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the notice was actually served on the assessee. Reference is also made to the decision of Hon ble Calcutta High Court in the case of Keshab Narayan Banerjee, 238 ITR 694(Cal.) wherein the question was Whether service of notice is condition precedent for passing orders under section 147 Held, yes Whether respondent made attempt to service notice under section 148 to appellant by registered post but it was not shown that either appellant refused to take service of notice or that appellant was not available at his residence or that there was no one willing to accept service on his behalf, service of notice could not be said to be properly effected and, therefore, assessment order passed under section 147 based on service was also bad in law Held, yes. 6.2 The ld. A/R has also drawn my attention on the approval of the Pr. CIT placed at page no. 7 of the paper book and also from the assessment record placed before me, I found that the ld. CIT (A) has given one consolidated approval of 12 different assessees in one short through one letter dated 21.03.2018 which is even not signed by him but signed by ITO, who is not a competent authority to give and sign the approval letter, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs u/s. 147 r.w.s. 148 on basis of information furnished and CIT gave approval without applying his mind in slipshod manner. As approval/sanction given by CIT was without recording his own independent satisfaction as noted above, therefore the reopening was not sustainable as per above judicial pronouncements and irregularities noted. There were clear irregularities and violation of the provision of Sec. 151 of the Act and very foundation of the issuance of the notice u/s 148 was not as per law. Then in that eventuality, we are of the view that the issuance notice 148 of the Act and all the consequent proceedings and assessment order passed was not in accordance with law. The case laws relied upon by the ld. DR are not tenable in the facts and circumstances of present case, therefore, considering the totality of facts and circumstances of the case as well as the judicial pronouncements qua the issue under consideration, we find merit in the contention of the ld AR, therefore, we quash the proceedings U/s 147 of the Act. Looking to these facts and record, it is also held that the procedures and way of approval and satisfaction is not proper. Here, the AO initiated proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lump Sum addition of Rs. 50,00,000/- for cash deposits in the bank account during the Demonetization Period, Unsecured Loan capital introduced. Hence, in our view lump-sum addition cannot be made under these accounts. The AO must have referred the specific amount with specific details and documents which he has not provided and as to what basis lump sum addition has been made and also failed to mention that on which account and as to what amount of addition consists of. It is also noted that the AO has not stated under which provisions or section he has made the lump-sum addition either u/s 68 or 69 or 69A or trading or u/s 56 i.e. other sources. It may be worthwhile to mention that when in the Act for every additions, the provisions or section has been provided by the legislature, otherwise there shall be no meaning of the Act. Hence the addition is wrongly made against the Act. (vide page 21-22 of the order). Similar view has been taken by the Coordinate Bench of the Tribunal in the case of Rajendra Kumar Meena v/s ITO Swaimodhopur in ITA No.516/JP/2024 dated 25.07.2024. I draw strength from the judgment of Hon ble Jharkhand High Court at Ranchi In the case of M/S. Pasari Ca ..... 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