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TMI Blog2025 (2) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of the principles of natural justice without granting to the assessee a fair, proper and reasonable opportunity including without issuing specific SCN to the assessee. 3. Under the facts and circumstances of the case, ld. CIT (A) grossly erred in confirming the action of ld.AO in making addition of Rs. 8,94,545/- on account of professional or technical services without appreciating the facts available on records and without considering them in their true perspective and sense therefore complete addition should be deleted. 4. Under the facts and circumstances of the case, ld. CIT (A) grossly erred in confirming the action of ld. AO in confirming the action of ld. AO for charging Interest u/s 234A, 234B & 234C of the Act. 5. The appellant reserved his right to add, amend or alter the grounds of appeal on or before the date of appeal hearing. 2. The appeal filed by the assessee is delayed by 21 days. The ld. A/R has filed condonation application dated 20.11.2024 stating that "That reason for late filing was that the order would have been served on the assessee's e-mail address on time, but the assessee mistakenly missed the said e-mail while checking. As a result, he wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s located at C-70, Shakti Nagar Ext., Delhi. Notice under section 142(1) along with query was issued to the assessee on 12.07.2017 requiring the assessee to furnish certain details/documents which remained unattended by the assessee. Again notice under section 142(1) and notice under section 143(2) of the IT Act, 1961 was issued on 11.08.2017 which also remained unattended by the assessee. Further, a show cause letter was issued on 11.08.2017 but the same was also not responded. Finally, the AO holding that since the assessee did not comply with any of the notices issued during the assessment proceedings, completed the assessment ex parte vide order dated 22.11.2017 at an assessed income of Rs. 21,65,000/- after making addition of Rs. 11,84,540/- which included unexplained income of Rs. 8,94,545/- and unexplained expenditure of Rs. 2,89,995/-. 5. Being aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT (A). The ld. CIT (A) partly allowed the appeal of the assessee by deleting the addition of Rs. 2,89,995/- on account of credit card payment as unexplained expenditure. 5. Aggrieved by the order of the ld. CIT (A), the assessee is in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acknowledgment of ITR as Annexed for the period from AY 2010-11 to 2019-20. In addition to these evidences Copy of Bank Statement for the period from 01.04.2009 to 31.03.2010 is also being annexed and marked as Annexure 47-54 for your kind perusal where it is specifically mentioned that assessee appellant has been residing at C-70, SHAKTI NAGAR EXTENTION, DELHI-110052 and was carrying out his business operation from that place, at that time also. Therefore in view of above context it is stated that in impugned case the assessment was being done by the Income Tax Authority ACIT Circle-1, Jaipur while by virtue of Section 124 of the Income Tax Act, 1961 it comes under the territorial jurisdiction of ITO Ward-70(3), Delhi. It is also established that before initiating this assessment proceedings the Income Tax Department neither exercised the powers as conferred under section 120 (Territorial Jurisdiction of Income Tax Authorities) nor under section 127 of the Income Tax Act, 1961 (Power to transfer cases), henceforth complete re-assessment proceedings should be quashed and treated as void ab initio. The relevant provisions of Income Tax Act, 1961 are being reproduced hereunder: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Directors- General or Principal Chief Commissioners or Principal Commissioners, by the Principal Directors-General or Principal Chief Commissioners or Principal Commissioners concerned or, if they are not in agreement, by the Board or by such Principal Director-General or Principal Chief Commissioner or Principal Commissioner as the Board may, by notification in the Official Gazette, specify. (3) ................. (4)................... (5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120. 127. Power to transfer cases.- (1) The Principal Director-General or Principal Chief Commissioner or Principal Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time when the impugned action was taken and the assessment order was passed, the appellant was residing and was carrying on her profession at Bangalore. The question is whether the AO at Mumbai could have assumed jurisdiction in the matter? 12. The jurisdiction of various income tax authorities has to be reckoned on the basis of statutory provisions, which confer such jurisdiction; both territorial, pecuniary or otherwise. Sub-section (1) of Section 120 of the Act provides that income tax authorities shall exercise all or any of the powers and perform all or any of the functions conferred or assigned to them under the Act, in accordance with such directions as the Central Board of Direct Taxes ('Board' for short) may issue from time to time. Section 124 of the Act thereafter becomes relevant for the purpose which pertains to the jurisdiction of AO and it reads thus (to the extent relevant) :- "124. (1) Where by virtue of any direction or order issued under sub- section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction- (a) in respect of any person carrying on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax vs Capstone Securities Analysis Pvt. Ltd. [2023] 457 ITR 775 (Bombay) (supra). 16. In the case of Abdul Azeez Haroon (supra), the assessee was a non-resident Indian. After the assessment was completed in respect of the relevant year, Commissioner (International Taxation) issued a reopening notice against the assessee at his address at Madurai (Tamil Nadu). The assessee contended that he was residing at Madurai prior to period relating to assessment year 2011- 12 and admittedly no return of income was filed by him during his stay at Madurai as he had no taxable income during that period. From assessment year 2010-11 assessee had shifted to Shimoga (Karnataka) where he was carrying on business and thus, the return of income from assessment year 2012-13 onwards were filed at Shimoga. The Hon'ble Madras High Court after considering notification dated 15.11.2014 in the context of facts of the case found that the appropriate officer to assess the petitioner was the officer at Shimoga. 17. In Capstone Securities Analysis Pvt. Ltd. (supra) the assessee- company had originally filed its return of income at Mumbai. After shifting of its registered office from Mumbai to Pune, it s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to inflict considerable inconvenience and harassment to the petitioner; the books of accounts would have to be produced hundreds of miles away from Calcutta, the partners or principal officer would have to be away fro the head office to comply with the order, and extra expenditure would have to be incurred by way of railway fare, etc.; that "the state" which included the income tax department had by an illegal order denied to the petitioner, as compared with other bidi merchants who were similarly situate, equality before the law and the assessee had the right to complain of an infraction of its fundamental rights under article 14 of the Constitution; (d) that therefore the order was liable to be set aside and an injunction would be issued. In the matter of M. Ramasamy Asari v. Second ITO (1964) 51 ITR 57 (Mad), the Division Bench has held (headnote): "In regard to the business income of an assessee it is only the Income-tax Officer having jurisdiction over the place where his business activities are concentrated who would have jurisdiction to assess ; where the assessee has no business it is the place of residence that determines jurisdiction. No other officer except the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completely based on presumptions/assumptions and deserve to be declared as null and void ab initio. Here in impugned case AO's self-satisfaction regarding escapement of income is not bringing on record which is mandatory condition of law under section 147 of Income Tax Act, 1961, it could have been come only after conducting enquiry and investigation but Ld. AO did not make such therefore complete re-assessment proceedings come under suspicious circle, various honorable courts propounded and led on this aspect and issue direction to handle such situation. In this case the Ld. AO did not make necessary efforts for discharging his liability and merely on the information as received from AIR re-open the assessment and the act was not tenable under law hence deserve complete re-assessment proceedings illegal and void ab initio. Similarly in the case of CIT v. Indo Arab Air Services (2016) 130 DTR 78/ 283 CTR 92 (Delhi)(HC) it was held that mere information that huge cash deposits were made in the bank accounts could not give the AO prima facie belief that income has escaped assessment. The AO is required to form prima facie opinion based on tangible material which provides the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved the notice which established that he has not recorded proper satisfaction/approval, before issue of notice u/s 148. By observing all the facts it is noted that for initiating the assessment proceedings there are some inbuilt safeguards to prevent the arbitrary exercise of power by an Assessing officer on the assessee. If the Ld. PCIT has given his approval after verifying the facts as submitted by the Ld. AO, perhaps he would not have granted his approval, which was mandatory condition to initiate the reassessment proceedings. In the instant case the Ld. PCIT has approved the reasons recorded after considering the AO's contention which itself on the mechanical manner. The power vested in the commissioner to grant or not to grant approval is coupled with a duty. The commissioner is required to apply his own findings or own thought process before given his approval but in this case he has not taken any efforts to cross check the observation of AO which clearly grab from the copy of reasons recorded as attached and marked as Annexure 57-59 in which the Ld. PCIT has simply mentioned "yes" and he has even not written any sentence in support of his approval and signed the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sturbed. It is also noted that the ld. AR of the assessee has advanced his paper book at Pages 3 to 5 as to reasons recorded for no satisfaction by the ld. Pr. CIT, the satisfaction if any was of the AO, who is not competent in the present case. In the case of N.C. Cables (supra) following case laws were relied therein. i. Maruti Clean Coal And Power Ltd. vs. ACIT (2018) 400 ITR 0397 (Chhattisgarh) ii. CIT vs. S. Goyanka Lime & Chemicals Ltd. (2015) 231 TAXMAN 0073 (MP) iii. PAC AIR SYSTEMS P. LTD. vs. ITO (2020) 58 CCH 0001 Del Trib iv. GORIKA INVESTMENT AND EXPORT (P) LTD. vs. ITO (2018) 53 CCH 0168 Del Trib. TARA ALLOYS LTD. vs. ITO (2018) 63 ITR (Trib) 0484 (Delhi) And the ld. CIT(A) kept mum on this very legal plea, which shows his contradictory approach. Therefore the notice, reasons recorded assessment all are the illegal bad void ab-initio and barred by limitation and liable to be quashed. It is also noted that the Joint CIT has forwarded a letter of consolidated approval of 26 assessee's vide his order 23.03.2017 (PB5A-5C) and this shows as to how the Ld. Pr. CIT has acted in formal way. On inspection of the assessment record, it has also been noticed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed." We also draw strength from the decision in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd. (2015) 231 TAXMAN 0073 (MP) wherein it has been held that While according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied" If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 147, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 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 compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, the Bench feels that there is jurisdictional error and the order passed by AO does not survive. Thus the appeal of the assessee is allowed. 3.1 As regards the penalty appeal of the assessee, it is not required to deal with for the reason that when the quantum appeal has been allowed then consequently penalty order of the ld. CIT(A) is infructuous 4.0 In the result, both appeals of the assessee are allowed Order pronounced in the open court on 10 /04/2024." In Principal Commissioner of Income Tax v. N. C. Cables Ltd; [2017] 88 taxmann.com 649/391 ITR 11 (Delhi), therein the reasons recorded for re- opening of assessment under Section 148; after the expiry of 4 years, which required approval of the Commissioner of Income Tax, when put up to the approving authority, was approved by a single word i.e. 'Approved'. The mere expression 'approved' denotes nothing, was the finding of the High Court of Delhi. Principal Commissioner of Income Tax v. Pioneer Town Planners Pvt. Ltd.; [2024] 160 taxmann.com 652/465 ITR 356 (Delhi) also indicated the mere phrase 'Yes' having been appended as approval which was held to be mechanical, on the face of it. The que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 9- As far as explanation to Section 151, brought into force by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue." The same contention as mentioned above also considered by the Honorable Jaipur Income Tax Appellate Tribunal, Jaipur Bench 'B' in the matter of Shri Ram Niranjan Tibra, Om prakash Morwal & Shri Parman and R. Verma Vs. ITO, WD-1, ITA No. 637,657 & 658/JP/2018; "In a series of decisions as relied upon by the Ld. Counsel of the assessee, the coordinate Benches of the Tribunal have taken a consistent view that mere signing against a particular column of the format is nothing but a mechanical approval without application of mind. Hence in view of the above facts and circumstances of the case, we hold that the reopening of the assessment is not valid and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the duty of the Department to allow the assessee not only to examine such documents but also to cross-examine the party. (vi) In support of our contention, we relied upon the decision of Hon'ble Supreme Court in case of Andaman timber industries V/s Commissioner of Central Excise (SC) 281 CTR (2015) 241 wherein the hon'ble Supreme Court has held that the denial of opportunity to the assessee to cross examination the witness whose statements were made the sole basis of assessment is a serious flaw rendering the order a nullity in as much as it amounts to violation of principles of natural justice. (vii) Same contention had also been pressed by following the above mentioned judgment of APEX court, by honorable jurisdictional, ITAT Bench of Jaipur held in the ITA Number 368/JP/2017 in the matter of Pramod Jain and other Vs. DCIT Circle-3, Jaipur; "Therefore the statement of witness cannot be sole basis of the assessment without given an opportunity of cross examination and consequently it is a serious flaw which renders the order a nullity." (viii) The Mumbai Special of the Tribunal in case of GTC Industries Vs. ACIT (Supra) had the occasion to consider the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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