Nitin Jain Vs ACIT (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT), Delhi, has allowed the appeal of Nitin Jain, quashing the reassessment order passed by the Assessing Officer (AO) under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961, for Assessment Year 2014-15. The primary reason for quashing the order was the invalid service of the jurisdictional notice issued under Section 148 of the Act.
The assessee argued that the notice under Section 148, dated March 30, 2021, was never communicated to him at the correct email ID ([email address removed]) which was available on the records of the Income Tax Department. Instead, the notice was sent electronically to an unrelated email ID ([email address removed]). The assessee supported this claim with screenshots from the e-filing portal and the ITBA system, as well as a copy obtained through an RTI application from the department. These pieces of evidence distinctly showed that the notice was transmitted to the incorrect email address.
The assessee further demonstrated that the correct email ID ([email address removed]) was indeed on the department’s records, as evidenced by a processing intimation under Section 143(1) dated November 26, 2020, which was sent to this correct email address, just four months prior to the issuance of the disputed Section 148 notice. This correct email ID was also present in the last Income Tax Return (ITR) filed by the assessee for Assessment Year 2020-21, filed on January 20, 2021, approximately two months before the notice was issued. The assessee also pointed out that even the originally filed ITR for Assessment Year 2014-15 contained a different email ID ([email address removed]), which was also not the email ID where the Section 148 notice was served.
The assessee contended that this service was not in accordance with Section 282 read with Rule 127 of the Income Tax Rules. Furthermore, no physical or postal communication of the notice was made. The assessee only became aware of the reassessment proceedings when a notice under Section 142(1), dated December 24, 2021, was sent to his correct email ID. Earlier notices under Section 142(1) were also sent to the incorrect email ID.
The ITAT relied on the judgment of the Hon’ble Delhi High Court in the case of Suman Jeet Agarwal vs. ITO, which held that when notices are sent to unrelated email addresses, the date the assessee first views the notice on the e-filing portal is considered the date of issuance. In this case, the assessee only became aware of the notice after April 1, 2021. The Tribunal noted the absence of any rebuttal from the Revenue regarding the incorrect service of the notice or any alternative mode of communication.
Considering the factual evidence presented by the assessee and the legal precedent, the ITAT found merit in the argument that a reassessment order framed based on a Section 148 notice that was never validly served is non-est and bad in law. Consequently, the Tribunal quashed the reassessment order and did not find it necessary to address the other legal aspects or the merits of the additions made. The appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal has been filed by the assessee against the first appellate order passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“CIT(A)”] under s. 250 of the Income Tax Act, 1961 dated 04.09.2023 which in turn emanates from the assessment order dated 21.03.2022 passed by the AO under s. 147 r.w.s 144 r.w.s 144B of the Act pertaining to Assessment Year 2014-15.
2. The assessee has raised following grounds of appeal:-
1. “On facts and in the circumstances of the case, the Ld CIT(A) has erred in law in upholding the impugned reassessment proceedings ignoring the fact that the jurisdictional notice u/s 148 was never served upon the appellant in compliance of sec 282A rwr 127 of I.T rules 1962 and therefore, such proceedings without service of notice u/s 148 is invalid in law and void-ab-initio and without prejudice the notice u/s 148 under the unamended act issued after 31.03.2021 is invalid in view of decision of Monmohan Kohlı.
2. On facts and in the circumstances of the case, the Ld CIT(A) has erred in law in upholding reassessment proceedings ignoring the fact that the reassessment proceedings have been initiated belatedly beyond the limitation of four years from the end of the assessment years without complying with the first proviso to sec 147 and such action is nothing but change of opinion.
3. On facts and in the circumstances of the case, the reassessment proceedings under appeal are bad in law as the same have been initiated by issue of notice u/s 148 during pendency of rectification proceedings u/s 154 of IT Act and such proceedings are invalid in view of the decision of Hon’ble Apex Court in the case of S M Overseas P Ltd vs CIT CA No.3612-3613 of 2012.
4. On facts and in the circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that impugned assessment is invalid and without jurisdiction as the reassessment proceedings has been initiated without application of mind and therefore, not in compliance of the mandate of sections 147/148/151 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed.
5. On facts and in the circumstances of the case is not justified in passing the best judgement assessment u/s 144 of the Act ignoring the fact that the appellant had submitted reply/clarification of all the queries and also has filed return of income after which notice 143(2) was issued and therefore, passing of order under wrong section makes the reassessment order invalid in law.
6. The impugned reassessment order u/s 147 rws 144 rws 144B of IT Act is passed without complying with the mandatory conditions laid down under the Act.
7. The Ld CIT(A) has erred both on facts and in law in confirming the addition of Rs.43,39,290/- on account of difference in the income as per Form 26AS and income declared in audited financials without considering the explanation/submission made and this addition is also not valid in law for the reason that the addition is not made under the particular head of income as defined in section 14 of IT Act.”
3. When the matter was called for hearing, Ld. Counsel broadly submitted that;
(I) Invalidity of reassessment order for non-service of the notice under s.148 of the Act: The appellant has challenged the validity of the impugned assessment order on the ground that no notice u/s 148 of the Act was ever served on the appellant. The service of the notice u/s 148 of the Act is a mandatory requirement for valid reopening of assessment. The materials on record goes to show that the notice dated 30.03.2021 purportedly issued u/s 148 of the Act was never communicated to the assessee in the correct e-mail ID i.e. accounts@JNitin.com, available on the records of the Department but to some unknown e-mail ID i.e.ashwani@abia.in. The fact of the service of notice u/s 148 on the above email id l.e. ashwani@abia.in is supported by the screenshot of e-filling portal (Pg 60 of the paper book) and the ITBA system screenshot (PB 154), the copy provided. by the department in response to RTI application (PB 151). These two evidences distinctly show that the notice u/s 148 has been sent through the electronic mode on the email id ashwani@abia.in and not on the appellant’s latest email id i.e accounts@JNitin.com. The above latest email id had been on record of the department is a fact evident from the screenshot (PB 148) which is the communication of processing intimation u/s 143(1) dated 26.11.2020 sent on above correct email id i.e. accounts@JNitin.com, which event is just 4 months prior to issue of notice u/s 148 on 30.03.2021. Further, the above latest email id can be found mentioned in last ITR available with AO for AY 2020-21 filed on 20.01.2021 (PB 146-147) which is about 2 months prior to issue of notice u/s 148 of IT Act in the present case. It is also relevant to note that even the ITR originally filed for AY 2014-15 u/s 139(1) of IT Act (PB 1-30) shows that the email id sushilkumar@myndsol.com which is not email id on which the notice u/s 148 was also served. The above service of the notice is therefore not in accordance with sec 282 read with rule 127 of IT rules.
There is no communication of the notice either through physically or through post/courier and only mode of communication adopted by the department in present case is electronic communication that too on the email id not pertaining to the appellant at relevant point of time as discussed hereinbefore. The appellant came to be aware of the ongoing reassessment proceedings for the first time when the notice dated 24.12.2021 issued u/s 142(1) of IT Act (PB 68-70) was sent to appellant’s correct email id i.e, accounts@JNitin.com, The earlier notices issued u/s 142((1) of IT Act dated 25.11.2021 & 13.12.2021 (PB 62-64 & 65-67) were never served upon the appellant for the same reason that those notices were sent on the incorrect email id, but on the email id used for service of notice u/s 148. This fact is evident from screenshot of service of notices u/s 142(1) placed with such notices. The appellant through letter dated 10.01.2022 (PB 106-107) in the last three para emphasized the importance of service of notice u/s 148 within the prescribed time implying that the fact of the notice u/s 148 not served within time, was an issue raised by the appellant assessee during reassessment proceedings at the first available opportunity after filling of return of income on 04.01.2022.
It is therefore a case where notice was only generated through ITBA portal and the appellant had no occasion to access the notice u/s 148 dated 30.03.2021 till he came to be aware of the ongoing reassessment proceedings on 24.12.2021. It is now a settled law that the effect of notice u/s 148 of the Act, sent to an unrelated e-mail ID would amount to non-issue of a notice, hence, would invalidate all actions taken in pursuance to such notice as the service of notice u/s 148 of the Act is a sine qua non for making an assessment u/s 147 of the Act.
In this context, reliance is placed on the decision of the Hon’ble Delhi High Court in the case of Suman Jeet Agarwal vs. ITO (2022) 143 taxmann.com 11 (Delhi) wherein in para 29,30,31.6&31.8, the Hon’ble Court held that where notices were sent to unrelated e-mail addresses, date on which notice was first viewed by assessee on E-filing portal was to be construed as date of issuance of notice. The Hon’ble Court in the above case in para 31.6 also held that if such date of issuance is determined to be on or after 01st April, 2021, the Notices will be construed as notices issued under section 148A (b) of the Act of 1961 in accordance with judgment in Ashish Agarwal 444 ITR 1 (SC). Thus, relying on the above decision, the issue date of notice u/s 148 would be construed to be the date when the appellant came to be aware of such notice after 01.04.2021 and the department was under obligation to comply with the direction of Hon’ble Supreme Court in Ashish Agarwal case (supra). Interestingly, the impugned assessment has been completed on the basis of the notice originally issued without converting the same as per dictates of the Hon’ble Apex Court to be proceedings u/s 148A of IT Act. The Hon’ble co-ordinate Bench in the decision of Brett Lee vs ACIT ITA No.867/Del/2023 dated 29.05.2024 has quashed the reassessment proceeding on identical facts of the case.
In the present case the notice is construed to be issued on 24.12.2021, beyond the relaxation upto 30.06.2021 granted under TOLA, even the one-time reprieve granted by the Apex Court in Ashish Agarwal (supra) does not save the validity of such notice. Without prejudice, since the notice u/s 148 is construed to be issued after 01.04.2021, after the amendment under Finance Act 2021 came into force, such notices are invalid unless the same are saved by the decision of Hon’ble Apex Court in the case of Ashish Aggarwal (supra). The Hon’ble Apex Court has converted all such notices falling during period of TOLA 2020 i.e. 01.04.2021 to 30.06.2021 as the show cause notices u/s 148A(b) of IT Act and such notices were needed to be converted into orders u/s 148A(d) of IT Act and thereafter, the notices under amended act under section 148 needed be issued, in the present case, no such procedure has been adopted and applying the decision of Monmohan Kohli vs ACIT W.P.(C) 6176 of 2021 (Del), such notices are not in accordance with law and consequent assessment proceedings is also invalid. The above view has been in accordance with the decision of Suman Jeet Aggarwal (supra) in para 25.3 of the said decision. Without prejudice to above, it may kindly be appreciated that since, the date of issue of notice u/s 148 is post expiry of the time limit relaxation granted by TOLA 2020 till 30.06.2021, granted by Hon’ble Apex Court in Ashish Agarwal case (supra) is not applicable as the same was applicable only in the cases where the notices under the Old Act were issued within the above relaxation period 01.04.2021 to 30.06.2021. The notices issued post expiry of above time limit extension are void-ab-initio as the above judgement has no application on such notices.
(II) Non-compliance of first proviso to sec 147 of IT Act:
(a) In view of the assessment completed u/s 143(3) dt: 30.12.2016 (PB 157) and the action u/s 147 initiated after expiry of four years from the end of assessment year, the appellant’s case could not have been reopened unless the escapement of income occasioned due to failure of the assessee to disclose truly & fully all material facts necessary for assessment. Thus, the AO was under obligation to identify such a failure attributable to appellant in order to cross the barrier put by the above proviso. The reason recorded (PB 155-156), the AO merely makes general observation that on account of failure on part of assessee to disclose truly & fully all material facts necessary for assessment, the income chargeable to tax has escaped assessment. The AO, apart from making such bald statement, does not support this finding by identifying any particular/specific facts not been truly or fully disclosed in the earlier assessment.
(b) The compliance of proviso solely depends on verification of facts disclosed by the assessee in the course of assessment proceedings. Otherwise, the AO cannot record satisfaction on such failure of the assessee. The purpose of proviso is to provide safeguard against the arbitrary misuse of provisions of reassessment and this mandatory condition is introduced through proviso to put the AO under obligation to Identify the particular facts not disclosed by the assessee. Such Bald assertion does not meet the mandatory requirement of above proviso in view of the following decisions:
* BPTP Limited vs. PCIT 185 DTR 0372 (Del);
* Anand Developers vs. ACIT (Bom) W P No.17 of 2020 dt: 18.02.2020;
* Best Cybercity (India) Pvt Ltd (2019) 414 ITR 0385 (Del);
* M/s Swarovski India Pvt. Ltd v. Deputy Commissioner of Income Tax. W.P.(C) 1909/2013 decided on 08.08.2014 (Del);
* Global Signal Cables (India) Pvt. Ltd. vs. Dy. CIT [2014] 368 ITR 609 (Del);
* HCL Technologies Ltd. v. Dy CIT W.P.(C) 8164/2020 (Del);
* M/s Sabh Infrastructure Ltd vs ACIT 398 ITR 0198 (Del).
(c) If the case of the AO is that the original assessment order was passed on the basis of incomplete/incorrect information provided by the appellant in those proceedings, then the only option available to the department under the circumstances was assumption of revisionary jurisdiction by the CIT/PCIT u/s 263 of the IT Act and not action u/s 147/148 of IT Act. The absence of such action by the department u/s 263 presupposes the fact that the information provided in the course of original proceeding were adequate and assessment proceeding were completed after due enquiry. In such a case, the action u/s 148 could not have been be taken in view of decision of Dushyant Kumar Jain vs Dy CIT 381 ITR 0428 (Del) (Para 16) and CIT vs Usha International Ltd 348 ITR 0485 (Del) (FB) (Para 14 & 15). The Co-ordinate Bench of ITAT in M/s A.S.T Pipes P Ltd ITA No.8312/Del/2019 dt: 27.10.2020 in para 13 pages 16-21 has quashed the reassessment proceedings accepting the above contention of the appellant.
(d) Non compliance of the first proviso to section 149(1) of the Act.
(e) The proviso to section 149(1) of the Act lays down the restriction for issue of notice u/s 148 of the Act for any AY commencing on or before 01.04.2021 if such notice for that AY could not have been issued on account of being beyond the time limit specified under the unamended provisions applicable till 31.03.2021. In the present case the AY involved is AY 2004-05 and the it is a case of prior assessment completed u/s 143(3) of the Act. In view of the first proviso to section 147 of the Act such case could not have been taken for reopening after expiry of 4 years from the expiry of AY in question unless there is failure attributed by the AO in the reason recorded of disclosing fully and truly all material facts or failure to file the return of income u/s 139(1) or in response to notice u/s 142(1)/148 of IT Act. In the present case, the notice u/s 148 dated 31.03.2021 was issued after expiry of four years from the end of AY 2014-15 and there is no allegation of failure of disclosure as per proviso to sec 147, the notice u/s 148 for AY 2014-15 could not have been issued under the unamended Act after 01.04.2019. The notice u/s 148 issued in the impugned proceedings is not valid in law due to the same issued in contravention of first proviso to sec 149(1) of IT Act.
(III) Merits of addition of Rs.43,39,290/- :-The additions in the present case have been made by inflating the receipts shown as per P&L account by the amounts of Rs.17.83,142/-, Rs.28,258/- and Rs.25,27,890/-. Thus, the above additions are trading additions and such additions are made ignoring the provision of sec 145(1) of IT Act which provides that the business income needs be assessed on the income computed from the books of account in accordance with the accounting regularly employed by the assessee. In case, the Ld AO was inclined to disturb the trading results which is done in present case, the Ld AO was required to record satisfaction about the correctness or completeness of accounts or that method of accounting has not been regularly followed or is not in accordance with the accounting standards notified u/s 145(2) of IT Act. In case, the Ld AO finds the accounts suffering from the above defects, the Ld AO could reject such books of account by invoking provision of sec 145(3) of IT Act and in that case, he is empowered to make best judgment assessment by disturbing the trading results extracted from the books of account. Unless power u/s 145(3) is exercised, the Ld AO is not entitled to assume jurisdiction to make any trading additions.
It is a settled law that if the books of account are not rejected by the AO u/s 145(3) of IT Act, the AO is not within his power to make trading additions.
Reliance is placed on the following authorities:
- CIT Vs Pashupati Nath Agro Food Products Pvt. Ltd. (Allahabad High Court) ITA No.165 of 2010 dated 04.05.2017;
- Sargam Cinema vs CIT 328 ITR 513(SC);
- Vikram Plastics & Others [239 ITR 161] (Guj);
- CIT Vs Rajni Kant Dave 281 ITR 6 (All);
- Vatika Landbase Pvt Ltd 383 IT 320 dated 26.02.2016 (Del):
- PCIT vs R.G. Buildwell Engineers Ltd (2018) 259 Taxman 371 (Del) approved by Hon’ble Apex Court in (2018) 259 Taxman 370 (SC);
- PCIT vs Forum Sales P Ltd 468 ITR 392 (Del).
On merits of individual additions, the submission of appellant is as under:
1. Addition of Rs. 17,83,142/-
The above addition is made for the reason that the customer of the appellant has deducted tax on the service tax component of the invoices issued and as a result thereof, the amount on which TDS deducted exceeded by 12.36%. The above difference was added to the returned income on the ground that the appellant filed to provide any documentary evidence to support the above contention. Without prejudice to challenge to the validity of reassessment proceedings, the matter can be sent back for limited verification to the AO.
2. Addition of Rs.28,258/-
The above difference is because of the TDS of income pertaining to earlier year, deducted by the customer during the year under consideration. The income in question stood accounting in preceding assessment year. Without prejudice to challenge to the validity of reassessment proceedings, the matter can be sent back for limited verification to the AO.
3. Addition of Rs.25,27,890/-
The basis of addition is rejection of explanation that the appellant has received advance of Rs.25.27.890/- from the customers on which the TDS was deducted in the year of remittance where as the income in relation to such advance was to be accounted for in the year of supply actually taking place. The above explanation was rejected for the reason that no documentary evidence in support of above contention was filed. It was also noted by the Ld AO that the amount of advances don’t appeal in audited balance sheet. The appellant seeks to submit that from the list of advances being part of the balance sheet (PB 46) shows that there has been amount of advances received during the year which are approx. of the same amount which is claimed by the appellant to be fresh advances on which TDS was deducted by the parties. In any case, without prejudice to challenge to the validity of reassessment proceedings, the matter can be sent back for limited verification to the AO.
4. The Ld.CIT DR for the Revenue relied upon the order passed by AO and endorsed by the CIT(A).
5. We have carefully heard the rival submissions and perused the material placed on record by way of Paper Book. Case laws referred have been given due weight.
6. The assessee has inter-alia challenged the validity and maintainability of impugned assessment order itself on the ground that the re-assessment order has been framed without valid service of notice purportedly issued under s. 148 of the Act. The assessee contends that service of notice under s. 148 of the Act is a mandatory requirement for continuation of re-assessment proceedings and culmination thereof in re-assessment order. The assessee with reference to the papers placed in the Paper Book as demonstrated before the Tribunal that notice issued under s. 148 dated 30.03.2021 was never communicated to the assessee in the correct e-mail ID of the Department. The notice has been sent to some other e-mail ID which has no relation with the assessee. The fact of service of notice at the wrong e-mail ID has been demonstrated to be supported by the screenshot of e-filing portal and ITBA system portal and further reinforced by the copy provided by the Department in response to RTI application. These evidences clearly show that notice under s. 148 cannot be deemed to have been validly served on the assessee. Noticeably the e-mail ID of the assessee is a part of the record of the Department as evident from the screenshot which is the communication of processing intimation under s.143(1) sent at the correct e-mail address as demonstrated in the submissions of the assessee recorded in the preceding paras. The assessee also claims that no communication of notice has been made to the assessee either physically or through post or other modes of communication adopted by the Department. The electronic communication appears to be made but delivered at the wrong e-mail ID.
7. We may usefully refer to the judgement of the Hon’ble Delhi High Court rendered in the case of Suman Jeet Agarwal (supra) wherein the Hon’ble Delhi High Court held that when the notices were sent to unrelated e-mail address, the date on which such notice was first viewed by the assessee on e-filing portal should be construed as the date of issuance of notice. There is no rebuttal on facts from the Revenue that notice was served on the correct e-mail ID or communicated physically or through the modes prescribed under s. 282 of the Act.
8. Having regard to the demonstration of factual matrix on behalf of the assessee and in the light of judicial view available in this regard, we find merit in the plea of the assessee that impugned re-assessment order framed in consequence of notice issued under s. 148 which was never served, to be regarded as nonest and bad in law.
9. Having regard to such conclusion, we do not consider it necessary to go into the other legal aspects or redressal of grievance on merits.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 07th March, 2025.
