Wpl-3268-22 (Bharat Shah v. Ito).Docsumedh

IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTIONWRIT PETITION NO.15580 OF 2022 Mrs. Chitra Supekar]Age- 47, Occ: Housewife]Presently Resi. At:]Flat No. 8, Bakul Society,]Prabhat Road, Lane No.3,]Deccan Gymkhana, Pune - 411004]PAN: ] .. Petitioner v/s. 1.The Income Tax Officer]Ward – 3(3)(1), Pune]PMT Commercial Complex,]Shankar Seth Road, Swargate,]Pune-411037] ] 2.Principal Commissioner of]Income Tax – 2, Pune]PMT Commercial Complex,]Shankar Seth Road, Swargate,]Pune – 411037] ] 3.National Faceless]Assessment Centre, Ministry]of Finance, Income Tax, 2nd Floor,] WPL-3268-22 (Bharat Shah vs. ITO).docSumedh 1/9 E-Ramp, Jawaharlal Nehru Stadium,]Delhi – 110003.] ] 4.Union of India]Through the Secretary, Ministry]of Finance, Government of India,]North Block, New Delhi – 110 001].. Respondents … Mr. Dinesh Ramesh Gulabai for the petitioner. Mr. Ajeet Manwani a/w. Ms. Samiksha Kanani for the respondents.… CORAM : DHIRAJ SINGH THAKUR AND KAMAL KHATA, JJ.RESERVED ON : 17th JANUARY 2023. PRONOUNCED ON : 15th FEBRUARY 2023 JUDGMENT : [PER KAMAL R. KHATA, J] 1.The present petition challenges the notice dated 20th March 2022issued u/s 148A(b) of the Act1 for the AY2 2018-19 wherein the casewas flagged in accordance with the risk management strategy by theCentral Board of Direct Taxes (“CBDT”) for non-filing of returns and onhaving information that the income chargeable to tax has escapedassessment; it also challenges the impugned order dated 5th April 2022 1 Income Tax Act, 1961 2 Assessment Year 2/9 issued under Section 148A(d) of the Actprincipallyon the ground thatthe same requires a separate approval from the PCCIT since it waspassed after expiry of three years from the end of the relevant AY 2018-19 i.e. by 31st March 2022 and the notice dated 13 April 2022 u/s. 148of Actseeking to reopen the petitioner’s assessment for AY 2018-19 Facts: 2.The petitioner is a housewife, was assessable as an individualunder the Act and since she had income below taxable income limits forA.Y.2018-19 she did not file her return of income as per provisions ofsection 139 of the Act. She held joint bank accounts with her husbandthrough which investments were made and income therefrom wereconsidered in her husband’s income tax returns. On 13th April 2022, thepetitioner was issued a reopening notice u/s.148 of the IT Act and aresponse thereto was submitted on 29 April 2022 disclosing a totalincome of Rs.5,000/- for A.Y. 2018-19 alongwith the return of incomeof the same date. 3.Mr. Gulabani, learned counsel for the petitioner submitted thatsince the petitioner had changed her address, the notice dated 20thMarch 2022 was not received by the petitioner as evinced by postalacknowledgments at Exhibit ‘E’ at pages 35 and 35A of the petition. He submitted that the petitioner’s changed address was updated on 10thJanuary 2021 with the respondents evinced by the Income tax return(ITR) acknowledgment filed being Exhibit “A colly” to the rejoinder atpage 116 and 117 of the petition. Consequently, the petitioner had noopportunity to file a response to the said notice and was deprived of ahearing as contemplated u/s.148A(b), and the order dated 5th April 2022was passed ex parte under Section 148A(d). He submitted that since thenotice was not validly served, the proceedings are void and in supportthereof relied upon the judgments in the case of CIT vs Eshaan Holding(P) Ltd3 and CIT vs Avtar Singh4. His challenge to the order dated 5thApril 2022 was on the ground of sanction i.e. since it was passed afterexpiry of three years the approval of the PCCIT would have to be takenas contemplated by section 151(ii) r.w.s 148(d) of the IT Act and theprevious sanction taken from PCIT would not suffice. 4.With regard to the impugned notice under 148 dated 13th April2022 he submitted that it was hand delivered to the petitioner on 21stApril 2022 when she visited the respondent’s office pursuant to amessage received on her registered mobile number (registered with thePAN) on 18th April 2022 and therefore not duly served. He submittedthat the respondents ought to have effected delivery through registered 3 344 ITR 541 (Delhi High Court) 4 304 ITR 333 (Punjab & Haryana High Court) 4/9 email. He submitted that since the reopening notice issued u/s. 148 ofthe Act dated 13 April 2022 is beyond 31st March 2022 i.e. three yearsfrom the end of the relevant A.Y. 2018-19 as prescribed u/s. 149(1)(a)of the Act, the sanction of the PCCIT as per Section 151(ii) of the Actought to have been taken for issuance of such notice. 5.The learned counsel urged that the AO has failed to show that hepossessed such information which suggested that income chargeable totax has escaped assessment and that the information was one which wasflagged in accordance with the risk management strategy formulated bythe CBDT or that any final objection was raised by the Comptroller andAudit General of India to the effect that the assessment has not beenmade in accordance with the provisions of the Act. He further submittedthat since more than 3 years lapsed from the relevant A.Y. 2018-19, theAO could issue a notice u/s. 148 only if he had in his possession, booksof account or other documents or evidence which would reveal theincome chargeable to tax had escaped assessment. He submitted thatthe impugned notice was issued based on suggested information. Hefurther submitted that no enquiry was recorded nor was a hearinggranted to the petitioner and thereby the entire process was in excess ofjurisdiction, illegal, arbitrary, perverse and in violation of principles of natural justice and consequently the petition deserved to be madeabsolute. 6.Mr. Manwani, learned counsel on behalf of the respondentscontended that the notice u/s. 148A(b) is dated 20 March 2022 and wassent to the petitioner via speed post. He submitted that since the noticewas within three years i.e. before 31st March 2022, from the end of therelevant A.Y. 2018-19, the respondents had rightly taken the sanctionfrom the PCIT in accordance with Section 151(i) of the IT Act. Hesubmitted that since there was no reply furnished by the petitioner, theorder could be passed on or before 30 April 2022. Consequently, theorder passed u/s. 148A(d) on 5 April 2022 was passed in accordancewith law. He submitted that in the present case, there was informationavailable on the portal of the risk management strategy formulated bythe CBDT under category of non-filing of returns (NMS) that theassessee had entered into financial transactions to the tune ofRs.1,55,09,548/- during A.Y. 2018-19. He further submitted that thepetitioner had not filed her ITR before A.Y. 2020-21 and her first I.T.R.for A.Y. 2020-21 was filed on 10 January 2021 mentioning returnincome of Rs.2,69,230/- paying NIL tax. Since there was concreteinformation related to the transactions of the petitioner to the tune of Rs.1,55,09,548/- such income had escaped assessment. He consequentlysubmitted that the petition deserves to be dismissed. Conclusion: 7. We have heard both counsels at length and have perused theproceedings. we agree with the view taken by the Delhi High Court inthe case of CIT vs Eshaan Holding (P) Ltd.5 upholding the view of theITAT that if there is no valid service of notice under section 148, thereassessment proceedings are null and void as also the decision of thePunjab and Haryana High Court in the case of CIT vs Avtar Singh6which held that service of notice under section 148 is a conditionprecedent for making reassessment or re-computation under section147 of the Act. Rs.1,55,09,548/- such income had escaped assessment. He consequentlysubmitted that the petition deserves to be dismissed. Conclusion: 7. We have heard both counsels at length and have perused theproceedings. we agree with the view taken by the Delhi High Court inthe case of CIT vs Eshaan Holding (P) Ltd.5 upholding the view of theITAT that if there is no valid service of notice under section 148, thereassessment proceedings are null and void as also the decision of thePunjab and Haryana High Court in the case of CIT vs Avtar Singh6which held that service of notice under section 148 is a conditionprecedent for making reassessment or re-computation under section147 of the Act. 8.In our view, before issuing the notice under section 148A (b) itwas imperative for the AO to have checked if there was a change ofaddress. A condition precedent for any proceeding including aproceeding u/s. 148A, is a valid service of notice, lest it would be ajurisdictional error. With regard to, the first notice dated 20th March2022, it is the case of the petitioner that they had not received any 5 344 ITR 5416 [2008] 304 ITR 333 7/9 notice dated 20th March 2022 and the revenue contended that it wasserved through speed post at the last known address. It is evident thatthough the respondents had the new address of the petitioner as evincedfrom the ITR filed on 10th January 2021, the respondents chose to sendthe notice to their old address. We also find no averment or proof of theservice of notice dated 20th March 2022 on the petitioner inrespondent’s affidavit in reply dated 14th November 2022. Thecascading effect of non-service was the petitioner did not get anopportunity to respond to the notice. Consequently, the notice dated20th March 2022 and the proceedings thereafter are void. Apropossection 151(ii) of the Act the sanction from the PCCIT ought to havebeen taken when order was sought to be passed beyond the period ofthree years i.e. beyond 31st March 2022 on 5th April 2022.Consequently, the notice dated 20th March 2022 and order dated 5thApril 2022 deserves to be set aside on account of jurisdictional error i.e.for want of service and consequently, for non-compliance with theprovisions of the Act. 9.With regard to the reopening notice u/s. 148 dated 13th April2022, the contention of the petitioner that they received the handdelivery of the notice on 21st April 2022 pursuant to the messagereceived by the petitioner on the registered mobile number on 18th April 2022 is also not controverted by the respondents in their reply. Noapproval from PCCIT was taken as contemplated u/s 151(ii) as thereopening was caused beyond three years and is therefore vitiated. Wealso find no averments responding to the ITRV dated 29 April 2022 filedfor A.Y. 2018-19 by the petitioner in response to the notice u/s. 148dated 13 April 2022 nor with regard to the compliance of thestipulations by the respondents u/s. 148 of the IT Act. 10.We are accordingly of the view that the impugned order dated 5April 2022 and the notice dated 13 April 2022 also deserves to bequashed and set aside. The respondent will be at liberty to proceed withthe assessment after issuance of notice and providing the Petitioner ahearing after a response is filed. Such exercise shall be completedpreferably within a period of twelve weeks from the date of receipt ofthis order. It is made clear that we have not examined the merits of thematter. 11.Rule made absolute. No order as to costs. (KAMAL KHATA, J.) (DHIRAJ SINGH THAKUR, J.)