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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO

"1. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the re-opening the assessment on the basis of vague information.

2. That on the facts and in the circumstances of the case and in law, the re- assessment proceedings u/s 147 have been initiated on the basis of suspicion and there was absolutely no material on record giving the AO any reason to believe that any income has escaped assessment. So, the re-assessment order is liable to be quashed.

3. That the enquiry notices were issued without seeking approval from the Pr. CIT, Bathinda and as such the assessment proceedings initiated u/s 148 is vitiated.

4. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the re-opening assessment as the reasons recorded to re-open the case are no reasons in the eye of law.

5. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not following the decisions of the jurisdictional Bench of ITAT on account of judicial discipline which were directly on the point in dispute. Accordingly, the re-assessment is liable to be quashed.

6. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the re-opening the case as well as re- assessment as the case cannot be re-opened for further scrutiny of the assessee.

7. That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the re-opening as well as re- assessment as there is no column in the return of income where bank deposits are to be shown and the name of the bank.

8. That the learned Pr. CIT, Bathinda erred in giving sanction to re-open the case mechanically and without application of mind on the facts of the case. So, the reopening is liable to be quashed.

9. That on the facts and in the circumstances of the case and in law, the notice issued u/s 148 was not served upon the assessee. So, the re- assessment is liable to be quashed.

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO

10. That on the facts and in the circumstances of the case and in law, as the learned AO has not considered the relevant documents supplied during the course of assessment proceedings. So, the re-opening as well as re- assessment is liable to be quashed.

11. That on the facts and in the circumstances of the case and in law, the learned CIT(A) should have deleted the whole addition in the hands of the assessee as is clear that he has deposited the money in his bank account out of the mortgage/sale proceeds of his residential house and industrial shed sold in financial year 2009- 10.

12. That in any case, the mortgage/sale proceeds of residential house and industrial shed sold in financial year 2009-10 in question. Accordingly, the addition made as income from other sources u/s 69A is liable to be deleted.

13. That any other relief may kindly be granted to the assessee to whom he is found entitled at the time of hearing of appeal."

3. None appeared for the assessee, however the assessee has filed written submission with a request to decide the subject appeal after considering the written submission filed by the assessing. Accordingly, we have heard the learned DR at length on legal issue and merits of the case and considered the material on record.

4. The ld. CIT(A) has rejected the appeal of the assessee after considering the details submissions of the assessee, remand report of the AO and rebuttal of the assessee

5. The grounds 1,2,4,5,6,7, and 9 are interlinked to each other whereby the assessee has challenged the reasons recorded by the AO under section 147 of the act on account of being recorded without material

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO evidence, vague, suspicious, columns of return, no reasons, the of notice and not following the Amritsar bench.

5.1. The AO has recorded the reasons for reopening of the assessment under section 147 of the act, which reads as under:

"Reasons for initiating proceedings u/s 147 of the Income tax Act.

1961

This office is in possession of certain information that during the year under consideration, the assessee has made transaction amounting to Rs 10,78,500/- and filed its return of income at Rs 2,90,290 which appears to be understatement of income and sales are shown at nil, which needs further scrutiny of the case.

I have therefore reasons to believe that income to the tune of Rs. 10,78,500/- has escaped assessment besides any other income chargeable to tax which may come to the notice during the course of assessment proceedings under this section. Therefore, proceedings u/s 147 of the Income Tax Act, 1961 are being initiated to bring the escaped assessment to tax by issuing notice u/s 148 of the Income Tax Act, 1961."

5.2 The ld. CIT(A) has upheld the validity of reopening of assessment under section 147 of the act by observing as under:

"5.1. I have given consideration to the incoherent contentions raised by the appellant challenging the reassessment by taking all possible grounds on this earth. The Assessing Officer has recorded reasons u/s 147 of Income Tax Act properly stating that there were transactions amounting to Rs. 10,78,500/- which were compared with the return of income showing the same at Rs. 2,90,290/- therefore there were reasons to believe that income has escaped assessment. The reasons were recorded on 24/03/2017 which were put before the competent authority for grant of statutory permission. The permission was accorded and on receipt of the permission on 29/03/2017, the Assessing Officer issued notice under section 148 of Income Tax Act on the same date through registered post which was never received and hence deemed to have been served. On the assessment record, there are number of notices which were sent to

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO the appellant but there was no compliance. The order for a-fixture was done by the AO on 23/11/2017 which was executed. The notice for reassessment was issued through speed post which has not returned back making a presumption that the same has been served. Hon'ble Supreme Court in the case of Income Tax officer, Income Tax Officer, Etawah v. Dharam Narain . [2018] 253 Taxman 479 (SC) held that the service of notice on representative of assessee on ground of non-availability of assessee is deemed service of notice on assessee and sufficient compliance of requirement of section. The Assessing Officer collected information from the banks and other third parties for making assessment. In a series of decided cases as ACIT Vs Rajesh Jhaveri Stock Brokers P. Limited.291 ITR 500 SC, A.L.A. Firm v. CIT [1991] 189 ITR 285 (SC), Raymond Woollen Mills Limited. Vs ITO 236 ITR 34 SC, Gurera Gas Cylinders Pvt. Ltd. vs CIT 258 ITR 170 P&H, Jawand Sons Vs. CIT 326 ITR 39 P&H, Sewak Ram Vs ITO 236 CTR 462 (P&H), Aditya and Co. Vs CIT 279 ITR

47 P&H, Tilak Raj Bedi Vs. JCIT 319 ITR 385 P&H, Pb. State Cooperative Agriculture Dev Bank Vs. CIT 207 CTR 352 P&H, Grover Nursing Home

248 ITR 493 P&H , Consolidated Photo & Finvest Ltd. Vs. ACIT 281 ITR

394 Del which lays down that the Assessing Officer is expected to possess information which should make a prima facie belief of income having escaped assessment. The Assessing Officer was not satisfied about the transaction in the bank account because these were not matching with the turnover of the appellant and therefore reasons to believe that income has escaped assessment definitely existed. The appellant has not availed opportunity of filing objections to the reasons, therefore no fault can be found in the procedure adopted by the Assessing Officer in initiating the reassessment. All the grounds of appeal making challenge to reassessment are devoid of any merits and hence

dismissed."

5.3 The assessee's submission reads as under:

2. That the case has been re-opened for further scrutiny of the case as per Para 1 of the reasons recorded placed at Page 1 of Paper Book Part 1. The case cannot be re-opened for making further scrutiny. So, the re- opening is liable to be quashed. Reliance is placed on decision of Hon'ble Agra Bench in the case of Raj Singh V. Kharaut Chhata, Mathura Vs ITO, 3(3), Mathura with ITA No. 408/Agra/2018 AY 2008-09 Dated 22.03.2019 directly on this issue.

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO

3. That as per Para 1 of the reasons recorded placed at page 1 of the Paper Book Part 1, the AO has mentioned that the assessee has shown sales at Nil whereas the assessee has shown sales at Rs. 496778/- at point 51 of the income tax return. Even the AO has mentioned in the Para 1 of the reasons recorded that the assessee has made transactions amounting to Rs. 1078500/- but he has not mentioned whether the transaction are of sale/purchase of goods or property or with regard to deposits in bank. So, the reasons recorded have become wrong and vague. So, the reasons recorded are no reasons in the eyes of law. Accordingly, the re- assessment is liable to be quashed.

4. That the assessee has filed return of income on 30.04.2010 u/s 139(1) of the Act and the same was considered while framing re-assessment. But the AO has not issued the notice u/s 143(2) of the Act while making ex- parte re-assessment. So, the ex-parte assessment is liable to be quashed in view of the Supreme Court direct judgment in the case of AC1T vs Hotel Blue Moon 321 ITR 362 (SC).

5.4 Per contra, the learned DR supported the order of the CIT appeal and the validity of the reasons recorded under section 147 of the act.

5.5 We have heard the learned DR and considered the written submission of the assessee and the citations relied upon by both the sides. Admittedly, the Assessing Officer has recorded reasons u/s 147 of Income Tax Act stating that there were transactions amounting to Rs. 10,78,500/- which were when compared with the return of income, it was shown the same at Rs. 2,90,290/-, therefore there the AO has valid reasons to believe that income has escaped assessment as per reasons recorded on 24/03/2017. The learned CIT appeal has upheld the validity of the reopening of the assessment based on judgements of the Hon'ble apex court and Jurisdictional High Court, higher judicial forum to the jurisdictional bench, as above. In view of the matter, we find no infirmity in the finding of

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO the CIT appeal on the issue of validity of the reopening of assessment under section 147 of the act and accordingly, the CIT appeal order is upheld on the issue of reopening of the assessment. Thus, the grounds of appeal number 1,2,4,5,6,7, and 9 are dismissed.

6. In ground number 3, 8 and 9 the appellant has challenged the reopening of the assessment as the enquiry notices were issued without prior approval of the PCIT Bhatinda, the PCIT has sanctioned approval under section 151 of the act, without application of mind and non service of Notice.

6.1 The CIT (A) stated that the reasons were recorded on 24/03/2017 which were put before the competent authority for grant of statutory permission.; that the permission was accorded and on receipt of the permission on 29/03/2017, the Assessing Officer issued notice under section 148 of Income Tax Act on the same date through registered post which was never received and hence deemed to have been served. On the assessment record, there are number of notices which were sent to the appellant but there was no compliance. The order for a-fixture was done by the AO on 23/11/2017 which was executed. The notice for reassessment was issued through speed post which has not returned back making a presumption that the same has been served. Hon'ble Supreme Court in the case of Income Tax officer, Income Tax Officer, Etawah v. Dharam Narain . [2018] 253 Taxman 479 (SC) held that the service of notice on representative of assessee on ground of non-availability of assessee is deemed service of notice on assessee and sufficient compliance of requirement of section.

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO

6.2 Having considered, the assessee's written submissions on legal grounds along with Paper Book and hearing the landed additional CIT DR on perusal of the records, we find that the legal issue in the case of the assessee is not covered with any decision of the ITAT Amritsar bench on the parity of facts. In our view, the Pr. CIT has given approval for re- opening the case as per the mandate and proper application of mind. So, the re-opening is valid in law and accordingly upheld. Admittedly, the Assessing Officer issued notice under section 148 of Income Tax Act on the same date through registered post which was never received and hence, it is deemed to have been served. The notice for reassessment was issued through speed post which has not returned back making a presumption that the same has been served. The CIT appeal has rightly placed reliance on the Hon'ble Supreme Court in the case of Income Tax officer, Income Tax Officer, Etawah v. Dharam Narain . [2018] 253 Taxman 479 (SC) wherein it is held that the service of notice on representative of assessee on ground of non-availability of assessee is deemed service of notice on assessee and sufficient compliance of requirement of section. Accordingly, the issue of validity of service of notice under section 148 is upheld.

6.3 The appellant assessee has referred in its written submissions that the sanction letter is placed at Page 2 of Paper Book, Part 1 where the Pr. CIT, Bathinda has mentioned simply "Yes" while giving sanction. So, it is clear that the Pr. CIT, Bathinda gave sanction to re-open the case mechanically and without application of mind on the facts of the case. He placed reliance on the Amritsar Bench. However, the bench has not considered the Hon'ble Jurisdictional High Court of Punjab & Haryana

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO judgement in the case of "Rakesh Gupta vs. Commissioner of Income-tax, Panchkula", [2018] 93 taxmann.com 271, wherein it was held that-

"………………………the case before us is entirely different. We have found that the reasons recorded by the AO justify the initiation of proceedings under Sections 147 and 148. As the Principal Commissioner agreed with these reasons, it was not necessary for him in his order according sanction to reiterate the reasons furnished by the AO. There is nothing that indicates that he did not apply his mind to the reasons furnished by the AO.

45. Reasons to believe are there. The reasons are based on tangible material. The return and account books of assessee had not undergone scrutiny at the time of assessment. The information is specific and not vague. A reasonable person can form an opinion on the basis of the material. The information received could form the basis of reason to believe that income has escaped assessment and the re-opening is not on mere suspicion. Hence, the assumption of jurisdiction is in accordance with law.

6.4 Respectfully, following the Hon'ble Jurisdictional High Court in case of "Rakesh Gupta vs. Commissioner of Income-tax", we uphold the validity of reopening of assessment on both the counts that valid reasons recorded by the assessing officer and valid sanction accorded by the landed PCIT under section 151 of the act by way of writing "Yes" in the approval form, as we understand that the PCIT was not required to reiterate the reasons recorded by the assessing officer under section 147 of the act. Thus ground number 3, 8 and 9 of the appellant are rejected.

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO

7. In ground number 10, 11 and 12 the assessee has objected to the impugned order that AO has not considered the relevant documents related to mortgage public sale proceeds, and the CIT appeal ought to have deleted the addition as explained proceeds from the mortgage/sale proceeds.

7.2 While confirming the addition, learned CIT appeal has observed as under:

"6.2. Agreement to sell of EWS 325 from Sh. Sachin Kumar: The appellant has claimed that he has entered into agreement to sell in respect of the property mentioned above on 10/09/2009 with Sh. Sachin Kumar for a sum of Rs. 60,000/-. This agreement to sell contained a recital of mortgage that the appellant would pay back the aforesaid amount by 31/12/2009 to get the release of the property. The Assessing Officer in the remand proceedings did not accept the contention for the reason that the aforesaid Sh. Sachin Kumar could not be produced to verify the document produced by the appellant. The production of this person was necessary because the appellant has submitted only photo copy of the agreement to sell dated 10/09/2009 and in absence of original the same was to be substantiated with the help of statement of persons executing the same. Further, the Assessing Officer submitted that the pattern of deposit in bank account was as under:

08-03-2010 1000

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO

1078500

The pattern of deposit as above does not support the version of the appellant that on 10/09/2009 and amount of Rs. 60,000/- was received which has been deposited over number of dates subsequent to 10/09/2009 as above.

6.3 Mortgage money from E-33 Industrial Area: It was contended that this transaction was entered with Sh. Mohar Singh on 12/12/2008 mortgaging the property above and on that date and amount of Rs. 5,00,000/- was received. However, before the Assessing Officer in the remand proceedings Sh. Mohar Singh stated that initially in the year 2008 the said property was mortgaged to him however towards the end of the year 2009 the appellant has sold the property in question for a consideration of Rs.9,24,000/- for which the transfer of title took place in February 2010. The contention of the appellant that the aforesaid amount of Rs. 5,00,000/- was available with him for making deposit in the bank account is fallacious and hence rejected.

6.4. In consideration of the discussion above, the addition made by the Assessing Officer is sustained and the grounds of appeal are dismissed. The Assessing Officer is directed to examine chargeability of capital gains on transfer of E-33 Industrial Area because the same has not been shown in the return of income filed by the appellant.

7.0 The appeal of the appellant is dismissed."

7.3 The appellant assessee has submitted that the assessee is individual and has filed his return of income at Rs. 290290/- on 30.04.2010. The case of the assessee was re-opened on the plea that the assessee has made transaction of Rs. 1078500/- and filed return of income at Rs. 290290/- which appears to be understatement of income and sales are shown at Nil, which needs further scrutiny of the case. Appellant assessee contended in the grounds of appeal that during the course of assessment, addition of Rs. 1078500/- was made without considering the relevant documents supplied

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO during the course of assessment proceedings: that the learned CIT(A) should have deleted the whole addition in the hands of the assessee as it was clear that he has deposited the money in his bank account out of the mortgage/sale proceeds of his residential house and industrial shed sold in financial year 2009- 10 and that in any case, the mortgage/sale proceeds of residential house and industrial shed sold in financial year 2009-10 in question are subject to tax. Accordingly, the addition made as income from other sources u/s 69A is liable to be deleted.

7.4 After hearing the learned DR on merits, and considering the written submissions of the assessee, we find that the agreement to sell contained a recital of mortgage that the appellant would pay back the amount by 31/12/2009 to get the release of the property. The Assessing Officer in the remand proceedings did not accept the contention for the reason that the Sh. Sachin Kumar could not be produced to verify the document produced by the appellant. The production of this person was necessary because the appellant has submitted only photo copy of the agreement to sell dated 10/09/2009 and in absence of original the same was required to be substantiated with the help of statement of persons executing the same. Further, the Assessing Officer submitted that the pattern of deposit in bank account was in different order to the pattern mentioned in the agreement to sale. Further, the pattern of deposit in the bank, does not support the version of the appellant that on 10/09/2009 and amount of Rs. 60,000/- was received which has been deposited over number of dates subsequent to 10/09/2009 as above.

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO

7.5 As regards to Mortgage money/ Sale proceeds from E-33 Industrial Area, it was contended that this transaction was entered with Sh. Mohar Singh on 12/12/2008 mortgaging the said property on that date for a consideration of an amount of Rs. 5,00,000/-. However, Sh. Mohar Singh stated before the Assessing Officer in the remand proceedings that initially in the year 2008 the said property was mortgaged to him, however towards the end of the year 2009 the appellant has sold the property in question for a consideration of Rs.9,24,000/- for which the transfer of title took place in February 2010. Therefore, we concur with the finding of the CIT appeal that the contention of the appellant that the aforesaid amount of Rs. 5,00,000/- was available with him for making deposit in the bank account is fallacious and hence rightly rejected. Thus, ground number 10, 11 and 12 are dismissed.

8. The ground number 13, is general nature and does not require adjudication.

9. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 08.07.2022.

Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member

*GP/Sr.PS* Copy of the order forwarded to:

(1) The Appellant:

(2) The Respondent:

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ITA No. 446/Asr/2019 Shiv Raj Singh v. ITO

(3) The CIT(Appeals)

(4) The CIT concerned

(5) The Sr. DR, I.T.A.T. True Copy

By Order

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