Sunil Jain v. National Faceless Assessment Centre

Case snapshot

Sections / provisions: 148; 251; 263 of Income-tax Act; 1961

Questions before the Court / Tribunal

• Sunil Jain Vs National Faceless Assessment Centre(Delhi High Court) Date 22nd July, 2022 Sub-When an item of addition is being contested before CIT(Appeals) against original assessment, can notice u/s 148 be issued in respect of another item of undisclosed income of the same nature on the plea that the jurisdiction to deal with the same lies with the CIT(Appeals)? The original assessment in this case was completed u/s 143(3) by mailing addition towards cash deposit during demonetisation period with Corporation bank, though there was cash deposited with PNB also during that period which was not disclosed in the…
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

SUNIL JAIN ..... Petitioner Through: Dr.Pankaj Garg, Advocate with Mr.Yaksh Garg and Mr.Vishal Chaudhary, Advocates.

FACTS: 2. The relevant facts of the present cases are that the Petitioner filed his return of income for the Assessment Year 2017-2018 on 22nd July, 2017 showing a returned income of Rs.28,42,430/-. The case of the Petitioner was selected under limited scrutiny (computer aided scrutiny selection) by the respondent department and accordingly a notice dated 24th September, 2018 was issued under Section 143(2) of the Act by the Assessing Officer against the Petitioner raising queries regarding cash deposit made by the Petitioner during the demonetisation period. 3. An assessment order dated 26th December, 2019 was passed by the Assessing Officer under Section 143(3) of the Act for the concerned assessment year 2017-18 at an income of Rs.57,17,430/- making an addition of Rs. 28,75,000/- to the returned income of the Petitioner under Section 69A of the Act on the ground that the Petitioner was not able to satisfactorily explain the source of the fund for the cash deposit of

Rs.34,54,500/- made by him in his bank account held with the Corporation Bank during the demonetisation period. 4. Being aggrieved by the assessment order dated 26th December, 2019 the Petitioner preferred an Appeal which is currently pending adjudication before the CIT (A) at NFAC. 5. During the pendency of the appeal for the year under consideration before the NFAC, the respondent issued the impugned reassessment notice dated 28th March, 2021 under Section 148 of the Act seeking to reassess the income of the petitioner for the Assessment year 2017-2018 qua cash deposit of Rs.12,50,000/- made in the Punjab National bank. The Petitioner filed his return of income in response to the reassessment notice on 21st April, 2021 at the returned income of Rs.28,42,430/-. Subsequently, several notices under Section 143(2) of the Act and Section 142(1) of the Act were issued to the petitioner for seeking information regarding the source of another cash deposit of Rs.12,50,000/-. It is the Petitioner case that he had furnished a detailed reply dated 10th January, 2022 to the notices explaining that the cash deposits of Rs.12,50,000/- made in the joint accounts held by the Petitioner with his…

challenging the notice before this Court. However, the petitioner failed to get the said writ petition listed before this Court immediately. The petitioner subsequently filed W.P.(C) 6036/2022 impugning the assessment order dated 27th March, 2022 passed under Section 147 of the Act. Both the petitions were listed for the first time on 13th April, 2022.

8. Learned counsel for the petitioner stated that the original assessment was validly framed vide order dated 26th December, 2019 after true and full disclosure by the Petitioner and therefore the issuance of the impugned notice by the Respondents during the pendency of the appeal before the CIT(A) was impermissible as it amounted to a mere change of opinion. 9. He further submitted that the impugned notice was null and void as it was an encroachment on the exclusive jurisdiction of the Commissioner (Appeals), in terms of Section 251 of the Act and was therefore liable to be quashed. He stated that the assessment order dated 26th December, 2019 was framed with additions made on the basis of cash deposit in bank accounts and if certain amounts were left to be added then in such a situation after passing of the assessment order, the power to do so lay with the CIT(A) exclusively. Learned counsel for the petitioner stated that the impugned notice had been issued by the Respondents without appreciating that the income of Rs.57,17,430/- considered by the Respondent in the show cause notice dated 15th March, 2022 was already under dispute being subject matter of an appeal before the CIT…

Appellant / assessee submissions

8. Learned counsel for the petitioner stated that the original assessment was validly framed vide order dated 26th December, 2019 after true and full disclosure by the Petitioner and therefore the issuance of the impugned notice by the Respondents during the pendency of the appeal before the CIT(A) was impermissible as it amounted to a mere change of opinion. 9. He further submitted that the impugned notice was null and void as it was an encroachment on the exclusive jurisdiction of the Commissioner (Appeals), in terms of Section 251 of the Act and was therefore liable to be quashed. He stated that the assessment order dated 26th December, 2019 was framed with additions made on the basis of cash deposit in bank accounts and if certain amounts were left to be added then in such a situation after passing of the assessment order, the power to do so lay with the CIT(A) exclusively. Learned counsel for the petitioner stated that the impugned notice had been issued by the Respondents without appreciating that the income of Rs.57,17,430/- considered by the Respondent in the show cause notice dated 15th March, 2022 was already under dispute being subject matter of an appeal before the CIT…

assessment proceedings under Section 143(3) which was not permissible in law. He also pointed out that transactions of cash deposits were disclosed by the Petitioner to the authorities in his replies submitted to the assessing officer during the proceedings under scrutiny assessment as well as his income tax returns. He emphasised that no additions on the basis of the same were made during scrutiny proceedings by the authorities. 10. In support of his submission, learned counsel for the petitioner relied on the decision of this Court in the case of Gurinder Mohan Singh Nindrajog v. Commission of Income Tax, (2012) 348 ITR 170 (Delhi) wherein it has been held as under:- “While framing an assessment under section 143(3) of the Act, any of the following situation may occur: ……….. (c) he makes no addition in respect of some of the items, though in the course of hearing before him holds a discussion of such items of income; …….. (e) further another situation may arise, where an item or items of income or expenditure, incurred and claimed is not at all considered and an assessment is framed, as a result thereof, a prejudice is caused to the Revenue, or ……… In category falling in (c) and…

11. Learned counsel for the petitioner also relied on the decision of the Bombay High Court in the case of Ardor Technopark Ltd. v. Dr. Zakir Hussein, Deputy Commissioner of Income Tax (2004) 271 ITR 50 (Bom) wherein it was held that the Assessing Officer cannot reopen the assessment on account of income escaping assessment when the commissioner had reopened assessment under Section 263 of the Act. The relevant extract of the decision in Ardor Technopark Ltd. (supra) is reproduced herein below:

13. Having heard learned counsel for the parties, this Court is of the view that in the present cases, the reassessment notice under Section 148 deals with the alleged cash deposit of Rs.12,50,000/- made by the assessee in the Punjab and National Bank and Bank of India. The cash deposit of Rs.12,50,000/- was not adjudicated upon in the Section 143(3) proceedings. In fact, the Assessment Order dated 26th December, 2019 deals with another

Revenue / respondent submissions

8. Learned counsel for the petitioner stated that the original assessment was validly framed vide order dated 26th December, 2019 after true and full disclosure by the Petitioner and therefore the issuance of the impugned notice by the Respondents during the pendency of the appeal before the CIT(A) was impermissible as it amounted to a mere change of opinion. 9. He further submitted that the impugned notice was null and void as it was an encroachment on the exclusive jurisdiction of the Commissioner (Appeals), in terms of Section 251 of the Act and was therefore liable to be quashed. He stated that the assessment order dated 26th December, 2019 was framed with additions made on the basis of cash deposit in bank accounts and if certain amounts were left to be added then in such a situation after passing of the assessment order, the power to do so lay with the CIT(A) exclusively. Learned counsel for the petitioner stated that the impugned notice had been issued by the Respondents without appreciating that the income of Rs.57,17,430/- considered by the Respondent in the show cause notice dated 15th March, 2022 was already under dispute being subject matter of an appeal before the CIT…

assessment proceedings under Section 143(3) which was not permissible in law. He also pointed out that transactions of cash deposits were disclosed by the Petitioner to the authorities in his replies submitted to the assessing officer during the proceedings under scrutiny assessment as well as his income tax returns. He emphasised that no additions on the basis of the same were made during scrutiny proceedings by the authorities. 10. In support of his submission, learned counsel for the petitioner relied on the decision of this Court in the case of Gurinder Mohan Singh Nindrajog v. Commission of Income Tax, (2012) 348 ITR 170 (Delhi) wherein it has been held as under:- “While framing an assessment under section 143(3) of the Act, any of the following situation may occur: ……….. (c) he makes no addition in respect of some of the items, though in the course of hearing before him holds a discussion of such items of income; …….. (e) further another situation may arise, where an item or items of income or expenditure, incurred and claimed is not at all considered and an assessment is framed, as a result thereof, a prejudice is caused to the Revenue, or ……… In category falling in (c) and…

Court / Tribunal analysis and reasoning

The reasoning is integrated into the packaged record. Read it with the facts, statutory text and operative directions; this editorial article does not invent missing reasons.

Operative decision and relief

“26. The operation of both these sections is some what similar in the sense if the Commissioner under s. 263 of the Act finds that the assessment order is prejudicial to the Interest of the revenue he can reopen the issue, at the same time, the Assessing Officer, under ss. 147 and 148 of the Act can reopen assessment if he has a reason to believe that Income chargeable to tax has escaped assessment. Therefore, virtually both the provisions are for reopening the assessment, one at the level of the Commissioner and, other at the level of the Assessing Officer. Now the question is: Whether Assessing Officer can reopen the assessment on account of income escaping assessment, especially, when the Commissioner has reopened the assessment by setting aside the original one and on remand the proceedings are pending

36. The law laid down in the said judgment is not at all applicable to the facts of the present case. It is no doubt true that operation of both these sections is somewhat similar in the sense if the Commissioner under s. 263 of the Act finds that the assessment order is prejudicial to the interest of the revenue he can reopen the issue, at the same time, the Assessing Officer, under ss. 147 and 148 of the Act can reopen assessment on account of income having escaped assessment. Sections 147 and 148 can be pressed into service to reopen assessment so long as the proceedings under section 263 are not finally terminated. In other words, during the pendency of such proceedings, the powers under ss. 147 and 148 to reopen assessment can always be exercised. But once the assessment in so far as it is prejudicial to the interest of the revenue is set aside by the Commissioner of Income Tax and the Assessing Officer is directed to make fresh assessment regarding grant of depreciation after examining all the aspects, the question of income escaping assessment would arise only when the reassessment order is passed by the Assessing Officer. In the present case, admittedly, reassessment…

Act, 1961 provides complete machinery for assessment/reassessment of tax, assessee is not permitted to abandon that machinery and invoke jurisdiction of High Court under Article 226. This Court is further of the view that the present cases do not fall under the exceptional grounds on which a writ petition is maintainable at the interim stage in tax matters. 21. Consequently, considering that the assessment order under Section 147 of the Act has already been passed in the present cases, the contentions and submissions advanced by the petitioner must be agitated before the appropriate authority. 22. Accordingly, the present writ petitions are dismissed with liberty to the Petitioner to raise all its contentions and submissions before the Appellate Authority.

Ratio and legal principle

• The packaged judgment addresses Sunil Jain Vs National Faceless Assessment Centre(Delhi High Court) Date 22nd July, 2022 Sub-When an item of addition is being contested before CIT(Appeals) against original assessment, can notice u/s 148 be issued in respect of another item of undisclosed income of the same nature on the plea that the jurisdiction to deal with the same lies with the CIT(Appeals)? The original assessment in this case was completed u/s 143(3) by mailing addition towards cash deposit during demonetisation period with Corporation bank, though there was cash deposited with PNB also during that period which was not disclosed in the…. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with sunil jain vs national faceless assessment centre(delhi high court) date 22nd july, 2022 sub-when an item of addition is being contested before cit(appeals) against original assessment, can notice u/s 148 be issued in respect of another item of undisclosed income of the same nature on the plea that the jurisdiction to deal with the same lies with the cit(appeals)? the original assessment in this case was completed u/s 143(3) by mailing addition towards cash deposit during demonetisation period with corporation bank, though there was cash deposited with pnb also during that period which was not disclosed in the… Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• 148 - apply the exact version considered in the judgment.
• 251 - apply the exact version considered in the judgment.
• 263 of Income-tax Act - apply the exact version considered in the judgment.
• 1961 - apply the exact version considered in the judgment.

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