CHANDIGARH BENCH INCOME TAX OFFICER, v. SUNIL KUMAR III(3) October 6, 2005 JUDGMENT JoginderSingh, Judicial Member. - This appeal is by revenue challenging theorder of ld. CIT(A) dated 6-7-2004 on following grounds: "1.That ld. CIT(A) has erred in law and facts inholding that proceedings had become vitiated by issuance of noticeunder section 148 by officer at Delhi when address known to ITO,Ward 25(1) was that of Delhi only and assessee intimated his Ludhianaaddress after lapse of one year. 2.That ld. CIT(A) has erred in law and facts in notappreciating fact that sale and purchase of shares was nothing but apaper transaction only to invest undisclosed income in house-property and laterto get benefit of exemption under section 54. 3.That order of ld. CIT(A) be set aside and thatof Assessing Officer be restored. 4.That appellant craves leave to add or amend anyground of appeal before it is finally disposed of." 2.The assessee declared income of Rs. 1.50 lakhs in its return on 26- 12-1996by claiming exemption under section 54F and long term capital gains amountingto Rs. 11,83,166. As per assessment order, on basis of informationavailable with department, notice under section 148 was issued by ITO,New Delhi and claimed to be served upon assessee by registered post.Another notice under section 148 was served upon assessee on 30-3- 2003.Again notice under section 142(1) was issued on 3-7-2003. None appeared onbehalf of assessee. Summons under section 131 of Act were issued to theassessee as well- as one Sh. Parveen Kapoor, owner of property - 62, SainikVihar, Pitampura, Delhi-34. Shri Parveen Kapoor appeared before ITO, NewDelhi on 6-10-2003 where his statement was recorded. Shri Parveen Kapoor in hisstatement stated that Sh. Sunil Kumar, i.e., assessee is known tohim and he regularly visits his premises. He also tendered that he has businesslinks with Shri Sunil Kumar whom he introduced in bank account maintainedat Oriental Bank of Commerce, ND Block, Pitampura, Delhi. He also told of hisaddress of Ludhiana. Notice under section 142(1) was issued to assessee on19-11-2002 at 62, Sainik Vihar, Delhi. On 12-12-2003 one authorisedrepresentative of assessee attended office of department and thecase was adjourned to 6-1-2004. On 16-3-2004, authorised representative ofthe assessee attended assessment proceedings and informed that assesseeis filing its return in Ludhiana. Notice under section 142(1) was issued on22-3-2004 fixing hearing for 24-3-2004. assessee objected to theinitiation of proceedings under section 147 as void inasmuch as issuance ofnotice under section 148 dated 28-3-2003 by ITO, New Delhi as withoutjurisdiction. objection of assessee was held to be not entertainable atthis stage in view of provisions of clause 9(b) of section 124(3) ofthe Act. Another notice under section 142(4) alongwith questionnaire wereissued and served on assessee of 25-3-2004 for hearing on 26-3-2004. On26-3-2004, one Shri B.K. Kohli, Advocate attended office of Income TaxOfficer and asked for copies of statements of Sh. Shanker Hari Maheshwari andSh. Parveen Mittal. Assessing Officer has reproduced questionnairewhich is available at Pages 2 & 3 of assessment order. AssessingOfficer held that all transactions were bogus, and thus, no long termcapital gains accrued to assessee. exemption under section 54F wasopined to be not allowable. However, assessee vide its reply dated26-3- 2004 claimed that there is no relationship of assessee with M/s.Maheshwari Sons to whom he was introduced through common friend. assesseevide its letter dated 29-3-2004 asked for copies of statements of ShriShanker Hari Maheshwari and Sh. Parveen Mittal also opportunity to crossexamine them. request of assessee was denied by Assessing Officeras is mentioned at Para 8, Page 4 of assessment order by contending thatthe assessee who has done share transactions with Shri Shanker Hari Maheshwariand as such onus is on assessee to produce Mr. Maheshwari for confirmationof deal and even otherwise claim of assessee cannot be entertainedat fag end of limitation period. As per Assessing Officer, entiretransaction has been arranged in such way as to generate bogus long termcapital gains in hands of assessee and same is colourable device.The Assessing Officer further held that shares amounting to Rs. 12.63 lakhsis nothing but own money of assessee introduced in books of account. Asan amount of Rs. 1,06,500 was paid by assessee to alleged share broker,the balance amount of Rs. 11,56,500 was treated as unexplained cash credit inthe hands of assessee under section 68 of Act. As per assessment order,it was held that assessee might have paid atleast 2 per cent premium on theamount which works out to Rs. 25,260. It was also added to income of theassessee as unexplained expenditure under section 69(c) of Act. Theassessment order was successfully carried in appeal before ld. CIT(A). Now,the revenue is aggrieved and is in appeal before Tribunal. 3.During arguments, we have heard Mrs. Sukhwinder Khanna, ld. DR for revenueand Sh. Sudhir Sehgal and Sh. Ashok Goel, ld. advocates for assessee. 4.The gist of arguments on behalf of department is that Assessing Officerwas having information about account of assessee maintained inPitampura, Delhi, notices were issued to assessee at Sainik Viharaddress to which there was no response and assessee responded first time inNovember that he is staying in Ludhiana wherein detailed questionnaires wereissued. Mrs. Khanna kly contended that assessee never objected to thenotice and only on 16th March informed that return has been filed inLudhiana. This information was deliberately given 15 days before time barringdate and there is deliberate attempt on part of assessee to avoidnotices. Mrs. Khanna further contended that ld. CIT(A) has not adduced anyreasoning in coming to particular conclusion. Reliance was also placed onsection 292B of Act. It was further contended that assessee is merelytaking technical issues at this stage and Assessing Officer in Delhi waswithin his right to send notice at known address. 5.On other hand, ld. counsel for assessee, Sh. Sudhir Sehgal klysupported orders of ld. CIT(A) by contending that assessee had beenassessed at Ludhiana for last about 20 years. local address of SainikVihar was given for business purposes only and same is confirmed which belongsto business associate. amount was transferred by DD from Delhi toLudhiana before March, 2003. It was kly contended that no notice undersection 148 was received or served upon assessee. Out attention was invitedto notice wherein address has been mentioned as 492/62, Sainik Vihar,Delhi. Mr. Sehgal further contended if there is delay that is on behalf ofthe department and department slept over matter upto October, 2003. Itwas also contended that Ludhiana address was provided to department by Mr.Kapoor from Sainik Vihar, Delhi and it could have been obtained earlier also.Again notice was sent to Sainik Vihar address and not in Ludhiana. It was alsoargued that in March, 2004, assessee came to know that notice has beenissued to him which was immediately replied vide letter dated 16-3- 2004informing that assessee is filing return in Ludhiana. Mr. Sehgal andMr. Goel, advocates for assessee kly contended that there was noterritorial jurisdiction with ITO, Delhi. Our attention was also drawn tothe fact that assessee filed return under protest. It was alsocontended that all transactions are genuine and if these are bogus, is onthe department to prove. Reliance was also placed on certain judicialpronouncements which we will consider while deciding issue. We haveconsidered submissions put forth by both learned representatives. 6.Brief facts of case are that assessee is assessed at Ludhiana for thelast about more than 20 years who is partner in firm namely, M/s. V.H.Synthetic Agency, Purana Bazar, Ludhiana, and thus, place of business ofthe assessee is at Ludhiana. Undisputedly, Sh. Sunil Kumar is permanentresident of Ludhiana. case relates to assessment year 1996-97. returnwas filed on 26-12-1996 alongwith various documents as per details whichare available at Page 2 of orders of ld. CIT(A). Similarly, returnfor assessment year 1995-96 was filed on 30-10-1996, PAN No. was allottedby ld. CIT(A), Ludhiana. In assessment year 1995-96, assessee investeda sum of Rs. 1,06,500 by draft for investment in shares, which amount waswithdrawn from firm as per copy of account already attached with returnfor assessment year 1995-96. As per department, case was re-openedunder section 148 by ITO, Ward 25(1), New Delhi and notice dated 28-2-2003 wassent at address mentioned as 492/62, Sainik Vihar, Delhi. This address wastaken by assessment proceedings on basis of one bank account opened withOriental Bank of Commerce, Pitampura, Delhi. notice was neither served uponthe assessee nor received by him. department did not produce any evidenceeither before first appellate stage or before us that notice was servedupon assessee by Regd. Post. correct address given in bank accountwas 62, Sainik Vihar, New Delhi and not 492/62 as mentioned in notice undersection 148. assessee even disputed that no notice under section 148 was servedupon assessee on 30- 3-2003. Undisputedly, wrong address has been mentionedat notice which may not be in knowledge of assessee. From thesefacts, it can be presumed that no notice was served upon assessee in March,2003. It is surprising to note here that department did not take any steptill October, 2003 and one summon under section 131 of Act was sent to SriParveen Kapoor, owner of house at Sainik Vihar and his statement wasrecorded in October, 2003 in Delhi wherein he gave address of assesseeof Ludhiana by further tendering that assessee is having business dealingwith him and he introduced bank account. Another point to be noted is that ifthe department was in position to locate address in October, 2003, itcould have located address in March, 2003 also by making inquiries fromShri Parveen Kapoor. There is force in contention of ld. counsel forthe assessee that in notice dated 19-11-2003, there is no specific mentionabout which document and information is required from assessee. Againletter dated 4-3-2004 was received at Delhi on address for filing of return forthe assessment year 1996- 97. copy of same is available in paperbook of assessee. assessee vide its reply dated 16-3-2004 (thecopy of same is available in paper book and evidence for filing thereturn for assessment year 1996- 97 alongwith letter of challenging thejurisdiction as is mentioned in para 6 of letter), there is no specificmention in letter that this is first time that assessee came toknow about purpose of ITO, Delhi sending notice in March, 2004. Anotherpoint to be noted in present facts is that ITO, New Delhi, himselfrealised that he had no jurisdiction to issue notice under section 148,transfer file to Ludhiana, and, therefore, Assessing Officer, Ludhianasent detailed questionnaire fixing date for 24-3-2004. Undisputedly, onday- to-day basis, replies were filed by assessee which are available atPage 49 of paper book again challenging jurisdiction of ITO, NewDelhi. It is evident from assessment order itself that assessee wasdenied cross-examination of witness on whose alleged statement case wasre-opened and contents of statement was provided on 26-3- 2004 to whichthe assessee asked for cross-examination. copy of letter is available atPage 9 of paper-book to which Assessing Officer in Para 8 of his orderstated that onus lays upon assessee by mentioning that it cannot be allowedat fag end of limitation period. This contention of AssessingOfficer is devoid of any valid reasoning in as much it is department who isrelying upon statement recorded at back of assessee, so thedepartment is supposed to produce such person for cross examination. It is notthe case that assessee is placing reliance on statement of such person.The ld. CIT(A) has placed reliance upon various judicial pronouncementswhich are available at pages 5 & 6 of its order like: (i) StateBank of Patiala v. Union of India [1973] (Punj. & Har.) (ii) CITv. Shyam Lal [1981] (Punj. & Har.) (iii) GargiDin Jwala Parshad v. CIT [1974] (All.) (iv) R.B.Shree Ram Durga Parshad & Fatehchand Nursingh Das v. Settlement Commissioner [1989] (SC) (v)The decision of Hon'ble Apex Court in thecase of Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR498 (SC) (vi) DollyFarms & Resorts (P.) Ltd. v. Dy. CIT [2001] 15 ITR EP 159 (ITAT)(Delhi) (TM). Thesedecisions relied upon by ld. CIT(A) are very much relevant. ratio ofthe above decision in nutshell pertains to opportunity of cross objections wasnot given and also copy of statement of witnesses, it was held that theprinciples of natural justice know of no exclusionary rules depending onwhether it would have make any justice if natural justice had been observed.Non-observation of natural justice is itself prejudice to any man and proof ofprejudice independently or proof of denial of natural justice is unnecessary. 7.From above sequence of facts, it is clear that there is no inherent lack ofjurisdiction by ITO, New Delhi. Neither notice was served upon assesseeor his representative, nor any efforts were made by department since March,2003 to trace correct address of assessee. Another point pertinent tomention here is that if Shri Parveen Kapoor could be summoned in October, 2003,the same could have been done in March, 2003 also. ld. CIT(A) has mentionedvarious judicial pronouncements at Pages 12, 13 & 19 on issue ofservice of notice. Another point worth mentioning here is that in notice undersection 148 which is available at Page 1 of paper book that since assesseehas not filed any Income Tax return for assessment year 1996- 97, thisnotice is issued, whereas fact is that assessee had already filed thereturn long back at Ludhiana. For this proposition, decision of Hon'bleApex Court in case of ITO v. Lakhmani Meval Das [1976] can bementioned wherein it was held that if no reasonable belief is there for thepurpose of re-opening , assessment deserves to be quashed. Besides, it maybe stated that having acceded to request of assessee that ITO, NewDelhi is having no jurisdiction to decide case of assessee, then theITO, Ludhiana without issuing notice under section 148 completed assessment onthe basis of notice already issued by ITO, New Delhi in our humble opinion isagain not valid, since without fresh issue of notice under section 148, theITO, Ludhiana could not have been vested with jurisdiction of primeassessment. issue of notice under section 148 and assumption ofjurisdiction is supposed to be correct and valid since issue of noticeunder section 148, ITO takes away vested right of person which herequires in completion of assessment. 8.We are not agree with contention of department that departmentalofficers are very much busy and it is assessee who deliberately delayed theproceedings or assessee did not cooperate when he came to know about theissuance of notice under section 148. Reliance can be placed upon decisionof Hotel White, Shimla by Chandigarh Bench of Tribunal wherein it was heldif notice sent in accordance with law or is not served on proper person, suchnotice would be illegal without jurisdiction. Reliance can be placed on thedecision of Amritsar Bench of Tribunal in case of Rajesh Mehtav. ITO dated 8-8-2005, copy of which is available at Pages 15- 22 ofthe paper book. For issue of notice under section 148 and for crossexaminations, reliance can be placed on decision of Chandigarh Bench of theTribunal in case of ITO v.Surinder Singh [IT Appeal No. 624 (CHD) of 2000] wherein Hon'ble Benchhas also mentioned case of Satish Gupta v. ITO [IT AppealNos. 57 and 100 (Delhi) of 2004, gist of which is available at Page 13 ofthe paper book. decision of Hon'ble Apex Court in case of KishinchandChellaram v. CIT [1980] wherein their lordships have held that ifany evidence itself used against assessee is not shown to him and anopportunity to controvert same is not given to assessee, that evidenceshall not be admissible in support of addition. 9.The ld. counsel for revenue, Mrs. Sukhwinder Khanna placed reliance uponthe decision in case of Swaran Kanta v. CIT [1989] in ouropinion is not applicable since there was topographically error in wronglymentioning name of deceased person in place of legal heir and thus itwas held to be clerical error but in present case, issue is with regardto jurisdiction, so not going to help revenue. Even as per Section 124(1),jurisdiction vested with ITO, Ludhiana has very rightly been quashed by ld.CIT(A). Even in reasons which are available at Page 1 of paper book of theassessee, there is mention of receipt of payment of Rs. 12.65 lakh having anescaped assessment but addition has been made after deducting purchaseprice paid for share in assessment year 1995-96, addition is madeat Rs. 11,56,500. From this reasoning also, it is clear that investment inshares stands accepted as genuine, then how it can be said to be bogus ornon- genuine. It has also been mentioned that assessee has not filed anyincome-tax return for assessment year 1996-97, hence Assessing Officerhas reason to believe that sum of Rs. 12.63 lakh has escaped assessment butthe fact is that assessee has already filed return in Ludhiana. Thedecision of Hon'ble Mysore High Court in C.N. Nataraj v. 5th ITO[1965] 55 ITR 14 on issue of necessity of valid notice wherein notice wasissued to minors and served upon person not authorized to accept notice, itwas held that notice which form basis of proceedings were wholly invalidand petitioner could not be assessed in pursuance of this notice. 10.The Hon'ble High Court of Calcutta in case of Bhagwan Devi Saraogiv. ITO [1979] . 11.In view of these facts, we have not found any mistake in order of ld.CIT(A) because it is merely presumption of Assessing Officer and it iswell settled that burden of proving mala fide is on person makingthe allegation and burden is very heavy. It is to be remembered that theallegation of mala fide are often more easily made out and veryreasons of such allegations demands proof of high degree of credibility. Therevenue has also not adduced any evidence regarding mala fideintention of assessee. presumption and assumption cannot take shapeof evidence however k it may. In view of these facts, order of ld.CIT(A) is upheld. 12.Ground Nos. 3 & 4 being prayers only requires no deliberation from ourside. 13.In result, appeal of revenue is dismissed. *** Income-tax Officer, III(3) v. Sunil Kumar