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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA No.1503/AHD/2017 (�नधा�रणवष� / Assessment Years: (2007-08) (Virtual Court Hearing) The ITO, Ward-2(3)(7), Vs. Shri Dipakkumar S. Mehta, Surat. Prop. of Seema Impex, 401, 6/1582, Kumbhar Sheri, Mahidharpura, Surat-395009. �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AFAPM8151K (Revenue) (Assessee) आयकरअपीलसं./ITA No.1461/AHD/2017 (�नधा�रणवष� / Assessment Years: (2007-08) (Virtual Court Hearing) Shri Deepak S. Mehta, Vs. The ITO, Ward-2(3)(7), C/o. 302, Nishit Diamond Complex, Surat. Gujjar Falia, Mahidharpura, Surat-395009. �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AFAPM8151K (Assessee) (Revenue)
Revenue by : Shri O.P. Vaishnav, CIT(DR) Assessee by : Shri Himashu Gandhi, CA सुनवाईक�तार�ख/ Date of Hearing : 25/06/2021 घोषणाक�तार�ख/Date of Pronouncement : 22/09/2021 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned Cross appeals filed by the revenue and assessee, pertaining to the Assessment Year (AY) 2007-08, are directed against the common order passed by the Learned Commissioner of Income Tax (Appeals)-3, Surat [in short “the ld. CIT(A)”] in Appeal No. CAS/3/trfd-1/55/2015-16 dated 28.03.2017, which in turn arises out of a common assessment order passed by Assessing Officer (in short “the AO) under section 143(3) r.w.s 147 of the Income Tax Act, 1961 [hereinafter referred to as the “Act”] dated 02.03.2015.
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta 2. First, we shall take assessee’s appeal in ITA No.1461/AHD/2017 for AY.2007-08, wherein the grounds of appeal raised by the assessee are as follows: “1. The learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in upholding the validity of issuing notice u/s 148 of the Act by Assessing officer. The Ld CIT (A) overlooked the fact that AO has not recorded finding in the reason that there was failure on the part of the assessee to disclose truly and fully all material fact necessary for the assessment as well as ignored the fact that AO has not obtained sanction from CIT before issue of notice u/s 148 of the Act as required u/s 151 of the Act. The assessee pleads that the order passed u/s 143(3) r.w.s. 147 of the Act is bad in law and invalid. 2. The learned Commissioner of Income Tax (Appeal) has erred in law and in facts in upholding the validity of impugned reassessment order passed by assessing officer without considering the fact that notice u/s 143(2) of the Act was not issued and served on the assessee.
The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in partially confirming the addition of impugned bogus purchases of Rs.80,17,790/- (being 12.50% of total alleged bogus purchases of Rs. 6,41,42,308/-) made by assessing officer. The Ld CIT(A) has relied on irrelevant consideration and factor while omitting to consider relevant facts and law in adjudicating the appeal filed by the assessee. 4. The assessee craves leave of Your Honour to add to, alter, amend and/ or delete all or any of the foregoing grounds of appeal.”
Facts of the issue which can be stated quite shortly are as follows: Assessee before us is an individual and filed his return of income on 11/10/2007 declaring total income of Rs.2,49,148/-. Assessment under section 143(3) of the Act was completed determining total income at Rs.3,52,580/-. Thereafter, Notice under section 148 of the Income Tax Act, 1961 was issued on 29/03/2014 and was duly served upon the assessee. Subsequently, notice under section 142(1) of the Income Tax Act, 1961 was issued on 14.08.2014 along with a detailed questionnaire and duly served upon the assessee on 28.08.2014. The assessing officer noted that accommodation entries of Rs.6,41,42,308/- was used by the assessee in his books of account and his return of income to suppress his taxable income. In view of the above, the Assessing Officer had reason to believe that an income of Rs.6,41,42,308/- as stated above, has escaped assessment in the hands of the assessee for the year under consideration. Therefore, the case was reopened and notice under section 148 of the Income Tax Act was issued on 28/03/2014. In
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta response, vide letter dated 03.06.2014, the assessee requested to treat the return of income filed on 11/10/2007, as return filed in response to the notice under section 148 of the Act and also requested to provide the copy of reason recorded for re- opening of the assessment. Copy of reason recorded for re-opening of the assessment was provided to the assessee, vide assessing officer`s letter dated 05.05.2014. Further notice under section 142(1) r.w.s. 129 of the I.T. Act issued on 08/12/2014, due to change of incumbent. The assessee vide his letter dated 05.09.2014 filed objection for reopen the case under section 148 of the Income Tax Act. A speaking order was passed by the assessing officer on 22.09.2014 to dispose of the objection filed by the assessee. After passing the said speaking order, the assessee did not object the reopening the assessment before the assessing officer and accepted the reopening, as lawful, under section 147 of the Act. Thereafter, assessing officer has considered the submissions of the assessee on merit and made addition to the tune of Rs.6,41,42,308/- on account of bogus sales.
On appeal, ld. CIT(A) dismissed the assessee`s technical issue (challenging the validity of reopening the assessment), observing as follows: “9. Ground regarding validity of re-opening of assessment 9. 1 This ground of appeal pertains to validity of re-opening of the case u/s 147 of the Act and issuing of notice u/s 148 of the I T Act. I have perused the submission of the AR and considered verbal arguments. It is seen from the records that the AO has received report from the Investigation Wing, Mumbai, which indicated that the assessee was beneficiary of accommodation entry operators. The said accommodation entry operator has admitted before the Investigation Wing that he had given bogus purchase bills to many persons including the assessee. Based on this report, the ld. assessing officer had ‘reason to believe’ that income has escaped the assessment. In the facts and circumstances, I am convinced that the re-opening in this case is justified. Further, in his submission and verbal arguments, the AR contested that the assessment is not made as per Law. The Id assessing officer has not provided the copy of statement, material, etc. which he has relied upon, to the assessee, thereby denying the assessee, an opportunity to counter the same. The AR further submitted that this is against the principle of natural justice and strikes of the validity of the assessment completed. 9.2 On examination of the records and it is seen that the material/ papers relied upon were not given to assessee. It is also seen that opportunity to cross-examine was not provided to the assessee. It is further seen that the Id assessing officer has not made any independent enquiries of his own. He has just relied on the report of Investigation Wing, Mumbai, The Hon'ble Supreme Court in the case of Andaman Timber Mart (281CTR 241) has categorically held that "not furnishing the copy material proposed to be relied upon, to the assessee invalidates the assessment
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta proceedings. The Hon'ble Gujarat High Court in the case of Legal Representatives late Laxmanbhai S Patel ( 327 ITR 290) also emphasizes the Same ratio. Furnishing copies of material collected by the Id assessing; officer to the assessee is a statutory requirement as provided in Section 142(3). I have carefully considered above, holding the assessment as invalid for above reasons without going into merits would be giving undue benefit to the assessee for technical mistake or omission by an individual officer. The principles of equity do not allow this. As this will be neither fair nor just for the revenue. Hence, I am constrained to dismiss this ground of appeal.” 5. Aggrieved by the order of ld CIT(A), the assessee is in appeal before us.
Shri Himashu Gandhi, Ld. Counsel for the assessee submits that Ld CIT (A) overlooked the fact that AO has not recorded finding in the reason that there was failure on the part of the assessee to disclose truly and fully all material fact necessary for the assessment as well as ignored the fact that AO has not obtained sanction from CIT before issue of notice u/s 148 of the Act as required u/s 151 of the Act. Therefore, ld Counsel prays the Bench that order passed u/s 143(3) r.w.s. 147 of the Act is bad in law and invalid.
On the other hand, ld DR for the Revenue vehemently contended before us that since the notice under section 142(1) of the Act was issued by the assessing officer providing sufficient opportunity to the assessee to support his return of income by documentary evidences, therefore Assessing Officer has fulfilled the statutory condition. Learned DR also contended that no specific notice was required to be issued u/s 143(2) and also contended that non-issuance of notice u/s 143(2) will not render the assessment invalid. Learned DR had also referred to a case law to buttress his contention, [Commission of Income Tax v. Madhya Bharat Energy Corporation Ltd. (2011) 337 ITR 339 Del], which purported to hold that non-issue of notice under 143(2) of the Act on an assessee prior to completion of the reassessment would not be fatal to the reassessment. Learned DR also sought to distinguish the decision in ACIT v. Hotel Blue Moon 321 ITR 362(SC), on the ground that it pertained to a block assessment. Learned DR also stated that during the assessment proceedings the assessee has participated in the assessment proceedings and did not object the jurisdiction of the assessing officer, so notice under section 143(3) has been deemed to be issued. The ld DR also got report from Page | 4
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta assessing officer, on the issue whether notice under section 143(2) was issued or not during the assessment stage? The said report of the assessing officer is reproduced below: “2. In this case, on the basis of information available on record that Shri Rajendra Jain, bogus entry provider has given accommodation entries to the tune of Rs.6,41,42,308/- to the assessee for the year under consideration. Accordingly a proposal for reopening the case was put up with Addl. CIT, Range-6, Surat on 27/03/2014 for taking necessary approval from the Id.CIT-2, Surat. The ld.CIT-11, Surat vide his goodself letter no. SRT/CIT-ll/HQ/Reopen/RNS/151(l)/2013-14, dated 29/03/2014 has accorded approval u/s 151 of the I.T. Act for issuing notice u/s 148 of the I.T. Act (attested copy of relevant documents are attached herewith). Thereafter notice u/s.148 of the I.T. Act was issued on 29/03/2014, which has been duly received by one Sachin on 30/03/2014(an attested copy of notice u/s148 is enclosed herewith). Further said notice issued at the address had received back from the Postal authorities with remark "Left". Thereafter various notices u/s 142(1) were issued to the assessee at his given address but received back with remark 'Left’. Thereafter the assessee filed on 06/01/2015 an objection against reopening his case, which had been duly disposed off on 09/02/2015 by passing speaking order. Said order was also intimated on 18/02/2015. Thereafter a show cause notice date 17/02/2015 was issued on 18/02/2015 against which the assessee filed an unsatisfactory reply a 25/02/2015. Accordingly order u/s l44 r.w.s.l47 was passed on 02/03/2015 and issued at the assessee's given address which had received back from the postal authorities with remark left. 3. From the above it is apparent that the assessee has raised unsustainable arguments which are not tenable on the basis of documents brought on record. Necessary approval was duly accorded by CIT-II, Surat before issuing notice u/s 148 of the I.T. Act. Further assessee’s contention is that no notice u/s 143(2) was issued in its case. Here on perusal of record it is seen that in response to notice issued u/s 148 of the I.T. Act, the assessee did not e-file a revised return of income a copy of e-filling profile the assessee is attached. Accordingly, there is no case for issuance of notice u/s 143(2) of the IT Act. Order under section 144 r.w.s. 147 was accordingly passed. 4. Necessary documents are submitted as paper book. The facts of the case may be appreciated and necessary order may be passed on merit.”
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that main grievance of the assessee is that assessing officer has not obtained sanction from Commissioner of Income Tax before issue of notice u/s 148 of the Act as required u/s 151 of the Act, therefore the reassessment proceedings are invalid. However, we examined this fact from the paper book of ld DR and noticed that assessing officer has Page | 5
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta obtained sanction from Commissioner of Income Tax before issue of notice u/s 148 of the Act as required u/s 151 of the Act, therefore, according to us the reassessment proceedings are valid. The sanction obtained from Commissioner of Income Tax before issue of notice u/s 148 of the Act is reproduced below: “OFFICE OF THE COMMISSIONER OF INCOME-TAX - II, ROOM NO.227, 2ND FLOOR, AAYKAR BHAVAN, MAJURAGATE, SUK AT. No.SRT/CIT-II/HQ/Re-open/RNS/151(1)/2013-14 Date: 29.03.2014 To The Income-tax Officer, Ward-6(l), Surat. Sub:- Approval u/s. 151 of the Ad for issuing notice u/s. 148 of the Act in the case of Shri Dipakkumar Sirhamalji Mehta for A.Y.2007-08-reg. ************* Please refer to the above. 2. In the above connection, I am directed by the Commissioner of Income-tax-II, Surat. to inform you that the proposal for obtaining the approval for initiating proceedings u/s.147 of the I.T. Act in the above case through Addl. C.I.T. Range-6, Surat vide his letter No.SRT/Addl.CIT/R.6/Approval/147/2013-14 dated 29/03/2014 for A.Y.2007-08, is approved. 3. The C.I.T.-II. Surat has accorded approval u/s.151(1) of the I.T. Act for taking action u/s.148 of the I.T. Act. (SUSHIL KUMAR SINGH) ITO(HQ)-II for Commissioner of Income-tax-II, Surat. Copy to: The Addl Commissioner of Income-tax, Range-6 w.r.t. to his letter No.SRT/Addl.CIT/R.4/Approval/147/2013-14 dated 29/03/2014 for kind information. (SUSHIL KUMAR SINGH) ITO(HQ)-II for Commissioner of Income-tax-II, Surat”
From the above, it is abundantly clear that assessing officer has obtained sanction from Commissioner of Income Tax before issue of notice u/s 148 of the Act as required u/s 151 of the Act, therefore, ground raised by the assessee is hereby dismissed.
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta 9. Now we shall examine the assessee`s stand that since there was no failure on the part of the assessee, to disclose truly and fully all material facts necessary for making the assessment therefore order passed by the assessing officer under section 143(3) of the Act should not be revised. At this juncture, ld DR argued that during the original assessment under section 143(3) of the Act, the assessee has not submitted entire documents, evidences and books of accounts, therefore he has not disclosed all the facts necessary for making the assessment, and hence since the assessee has not disclosed fully and truly all material facts during the original assessment proceedings, therefore assessee cannot take the benefit of first proviso to section 147 of the Act. During the course of hearing the Bench asked ld Counsel to provide the copy of original assessment made under section 143(3) of the Act, however, ld Counsel failed to provide the copy of the original assessment framed under section 143(3) of the Act, therefore it is not possible for the Bench to examine whether all books of accounts, documents and evidences were submitted during the original assessment proceedings and assessing officer has examined these or not? Hence, plea of the ld Counsel that “assessing officer cannot reopen the assessment beyond a period of four years” is not tenable. Hence, according to us assessee has not disclosed all the facts necessary for making the assessment; therefore, we dismiss the ground raised by the assessee.
We have also gone through the reasons recorded by the assessing officer, which is placed at assessee`s paper book page No.2 and 3, and noticed that there is no any defect in the reasons recorded by the assessing officer. The assessing officer took the approval from the commissioner and issued notice in accordance with law. Having gone through the “reasons recorded”, we are of considered opinion that not only there existed new information with the AO from the credible sources, but also that he has applied his mind and recorded the conclusion that assessee took accommodation entries of bogus purchases, and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The Hon'ble Supreme Court in the case of Phul Chand Bajrang Lal and another vs. ITO 203 ITR 456, was considering the question of reassessment beyond the period of four years in the case of an assessee firm; and had held that in case of acquiring fresh
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta information specific in nature and reliable, relating to the concluded assessment, which went to falsify the statement made by the assessee at the time of original assessment and, therefore, he would be permitted under the law to draw fresh inference from such facts and material. The Court also went to an extent of saying that there are two distinct and different situations where the transaction itself on the basis of subsequent information is found to be bogus transaction and in such event, mere disclosure of the transaction cannot be said to be true and full disclosure and the Income-tax Officer would have jurisdiction to reopen the concluded assessment The Apex Court in the case of Phul Ghand Bajrang Lal (supra), observed as following: "...one has to look to the purpose and intent of the provisions. One of the purposes of Section 147 appears to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would, be travesty of justice to allow the assessee that latitude."
The Hon'ble Gujarat High Court in the case of Dishman Pharmaceuticals and Chemicals Ltd. vs. DCIT (OSD), Ahmedabad (2012) 346 ITR 228 (Guj) has summed up the requirements of the law, in such circumstances and has held as following: "There is no set format in which such reasons must be recorded. It is not the language but the contents of such recorded reasons which assumes importance. In other words, a mere statement that the Assessing Officer had reason to believe that certain income has escaped assessment and such escapement of income was on account of non-filing of the return by the assessee or failure on his part to disclose fully and truly all material facts necessary for assessment would not be conclusive. Nor, absence of any such statement would be fatal, if on the basis of reasons recorded, it can be culled out that there were sufficient grounds for the Assessing Officer to hold such beliefs." 12. A three Judges bench of Hon'ble Gujarat High Court in the case of A.L.A. Firm v. CIT, 189 (1991) ITR 285, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the Page | 8
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied.
As observed earlier not only there existed new information with the AO from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine/bogus and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. The contention of the ld Counsel that the report of the Director of Income Tax (Investigation) -II, Mumbai, cannot constitute a reason to believe within the meaning of section 147 is misplaced in law and facts. The Supreme Court in the case of Purushottam Das Bangur & Anotherts224 ITR 362 (SC) held as under: "Assessee claiming long-term capital loss on sale of shares. Income-Tax Officer accepts the claim. Later on receipt of a letter from DDI that the fair market value of the share on the date of sale is much more than the Official Quotation due to the fact that the company was prospering at the time, the Income-tax Officer issued notice for reopening assessment u/s. 147(b). The High Court held the notice not valid. Whether the notice u/s. 147(b) is valid and the assessment could be re- opened? Yes, on the basis of the facts & information contained in the DDI's letter, the Income-tax Officer without further investigation could have formed the opinion that there was reason to believe that the income of the assesses chargeable to tax has escaped assessment. Hence the notice u/s. 147 (b) was valid." The Hon`ble Gujarat High Court has held that reopening on the basis of the information of the Investigation Wing is valid. In the case of Peass Industrial Engineers Pvt. Ltd 73 taxmannn.com 185(2016) (Gujarat) it was held whether at the instance of same material of another wing, whether reopening is permissible or not. While dealing with said issue this Court has examined the said aspect and has come to the conclusion that reopening is permissible. In the said group of appeals, the substantial question of law posed before the Court, whether the (ITAT was justified in setting aside the reassessment orders on the ground that reopening of assessment under Section 147 of the Act was bad in law. In that particular group of
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta matters, the reopening was initiated by the authority based upon the show cause notice along with accompanied material forwarded by the Excise Department to the Income-Tax Department and on the basis of said material provided by the Excise Department, the Assessing Officer has reopened the assessment of the assessee by issuing notice under Section 148 of the Act. The assessee of that case in the similar manner in this case has contended that the information provided by a different Investigating Team may not be ipso facto utilized to reopen the assessment which has become final by the Income-tax authority. It was also contended by the assessee of that case that there was no independent application of mind on the part of Assessing Officer and just based upon said information provided by the Excise Department, the authority resorted to Section 148 of the Act to reopen the assessment. This issue in extenso dealt with by the Division Bench and by a detailed judgment, came to conclusion that the Assessing Officer has merely relied upon the show cause notice issued by the Excise Department and has not concluded finally and therefore, there is no illegality or irregularity in arriving at a belief that assessment deserves to be reopen. Relying upon the decision delivered by the Apex Court in the case of Purushottam Das Bangur & Another, 224 ITR 362 (SC), it was held that action of reopening of assessment was found to be justified. Similar view has been held in the case of Pushpak Bullion (P) Ltd [2017] 85 taxmann.com 84 (Gujarat) wherein the court held that the AO had tangible materials at his command to form a bonafide belief on the basis of the information received from Investigation Wing. At the stage of issuance of notice the only question is whether there was the relevant material on which a reasonable person could have formed a reasonable belief.
Section 147 authorizes and permits an Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that the said income for any assessment year has escaped assessment. The expression 'escaped assessment’ clearly connotes a very basic postulate that the income for a particular assessment year went unnoticed by the Assessing Officer and because of it not being noticed by him for any reason, it escaped assessment. The meaning of the expression 'escaped assessment' is so simple and straight that it does not leave
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta anyone in doubt that power under section 147 could be invoked by the Assessing Officer if it is a case of escape of assessment of income for a particular year. The provisions of section 147 require that the Assessing Officer should have 'reason to believe' that any income chargeable to tax has escaped assessment. The word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words 'reason to believe' cannot mean that the Assessing Officer should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination, he makes or from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he has reason to believe that such income had escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision. A belief though justified for the purpose of initiation of the proceedings under section 147, may ultimately stand altered after the hearing and while reaching the final conclusion on the basis of the intervening enquiry. At the stage where he finds a cause or justification to believe that such income has escaped assessment, the Assessing Officer is not required to base his belief on any final adjudication of the matter.
In view of the above facts and provisions of the Act regarding the issue of jurisdiction, it is evident the Assessing Officer has initiated the reassessment proceedings u/s. 147/148 of IT Act, 1961 as per the provisions of the Act and all the conditions laid down for reopening has been fulfilled. Hence, this ground of the assessee fails and the ground of appeal is dismissed.
The next stand of assessee is that notice under section 143(2) of the Act was not issued. In this regard, ld DR submits before us that assessee has been participating in the assessment proceedings before the Assessing Officer and he did not raise this issue before the Assessing Officer, therefore at this point the assessee cannot raise this issue. On the perusal of the details it is observed that the assessee
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta has never raised any objection during the assessment proceedings regarding the reopening of the assessment. The assessee had not filed the return of income in compliance to the notice u/s 148 of the Act however participated in the re- assessment proceedings. This issue of reopening being bad in law was raised for the first time during appellate proceedings. The objection raised by the assessee regarding the assumption of jurisdiction by AO by issuance of notice u/s 148 of the Act, is devoid of merits and facts. The AO reopened u/s 147 of the Act. The notice u/s 148 of the Act was issued on 28.03.2014 and served on the assessee. The assessee did not file any return of income in response to the notice u/s 148 within the statutory period of 30 days. However, the assessee submitted a letter dated 28.03.2014 requesting the AO to treat the return of income filed on 11.10.2007, as filed in response to the notice under section 148 of the Act.
We note that since the notice under section 143(2) has not been issued. During the course of hearing the Bench asked the ld. DR to investigate this fact in the assessment records, whether notice under section 143(2) was issued to the assessee or not? In turn ld. DR got the matter investigated with the Assessing Officer. The report received from Assessing Officer has been reproduced by us in page no.7 of this order, as a part of written submission of ld. DR, however, at the cost of repetition, the same is reproduced below for ready reference: “2. In this case, on the basis of information available on record that Shri Rajendra Jain, bogus entry provider has given accommodation entries to the tune of Rs.6,41,42,308/- to the assessee for the year under consideration. Accordingly a proposal for reopening the case was put up with Addl. CIT, Range-6, Surat on 27/03/2014 for taking necessary approval from the Id.CIT-2, Surat. The ld.CIT-11, Surat vide his goodself letter no. SRT/CIT-ll/HQ/Reopen/RNS/151(l)/2013-14, dated 29/03/2014 has accorded approval u/s 151 of the I.T. Act for issuing notice u/s 148 of the I.T. Act (attested copy of relevant documents are attached herewith). Thereafter notice u/s.148 of the I.T. Act was issued on 29/03/2014, which has been duly received by one Sachin on 30/03/2014(an attested copy of notice u/s148 is enclosed herewith). Further said notice issued at the address had received back from the Postal authorities with remark "Left". Thereafter various notices u/s 142(1) were issued to the assessee at his given address but received back with remark 'Left’. Thereafter the assessee filed on 06/01/2015 an objection against reopening his case, which had been duly disposed off on 09/02/2015 by passing speaking order. Said order was also intimated on 18/02/2015. Thereafter a show cause notice date 17/02/2015 was issued on 18/02/2015 against which the assessee filed an unsatisfactory reply a 25/02/2015. Accordingly order u/s l44 r.w.s.l47 was passed on 02/03/2015 and issued at the assessee's given address which had received back from the postal authorities with remark left. Page | 12
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta 3. From the above it is apparent that the assessee has raised unsustainable arguments which are not tenable on the basis of documents brought on record. Necessary approval was duly accorded by CIT-II, Surat before issuing notice u/s 148 of the I.T. Act. Further assessee’s contention is that no notice u/s 143(2) was issued in its case. Here on perusal of record it is seen that in response to notice issued u/s 148 of the I.T. Act, the assessee did not e-file a revised return of income a copy of e-filling profile the assessee is attached. Accordingly, there is no case for issuance of notice u/s 143(2) of the IT Act. Order under section 144 r.w.s. 147 was accordingly passed. 4. Necessary documents are submitted as paper book. The facts of the case may be appreciated and necessary order may be passed on merit.” After going through the report of the Assessing Officer, we have observed that Assessing Officer did not issue the notice under section 143(2) of the Act. We note that notice under section 143(2) should be issued by the Assessing Officer to assume the jurisdiction as well as to complete the scrutiny assessment procedure. The proviso to section 143(2) puts an embarge on the Assessing Officer to exercise jurisdiction. It is the discretion of the Assessing Officer to accept the return of income of assessee as it is, or to proceed further with the assessment of income, once the Assessing Officer decided to proceeds he has to issue notice under section 143(2) to make the assessee aware that his return of income has been selected for scrutiny assessment. We note that omission on the part of the Assessing Officer to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and therefore the requirement of notice under section 143(2) cannot be dispensed with. Similar facts and observations were made by the Hon'ble Supreme Court in the case of Hotel Bluemoon in Civil Appeal No. 1198 of 2010, dated 02.02.2010.
We note that the order passed by Delhi High Court on 17th August, 2011 in Review Petition No.441/2011 in ITA No.950/2008 (CIT v. Madhya Bharat Energy Corporation) whereby Court reviewed its main judgment in the matter rendered on 11th July 2011 on the ground that the said appeal had not been admitted on the question concerning the mandatory compliance with the requirement of issuance of notice under section 143(2) of the Act. In its review order, Court noted that at the time of admission of the appeal on 17th February, 2011 after noticing that in the said case that no notice under section 143(2) had
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta ever issued, the Court held that no question of law arose on that aspect. The upshot of the above discussion is that the decision of this Court in CIT v. Madhya Bharat Energy Corporation (supra) is not of any assistance to the Revenue as far as the issue in the present case is concerned. This is important to mention that the same Delhi High Court in its subsequent decision in the case of Pr. CIT v/s Shri Jai Shiv Shankar Traders (P) Ltd. (383 ITR 448) has overturned the earlier ruling given in case of Madhya Bharat energy Corporation (after duly considering this decision) and held that failure of assessing officer to issue notice u/s 143(2) is fatal to order of reassessment and such failure cannot be condoned by referring to section 292BB of the Act. Thus, decision in the case of Madhya Bharat Energy Corporation (supra) does not hold the field, therefore, we do not agree with the contention of ld DR to the effect that non-issuance of notice under section 143(2) of the Act does not render the reassessment invalid.
We note that Ld. DR for the Revenue also sought to distinguish the decision in ACIT v. Hotel Blue Moon (supra) on the ground that it pertained to a block assessment. We note that Ld Counsel of the Assessee had referred plethora of judgments laid down by Hon'ble High courts following the judgment of the Apex court where in the facts were similar to case at hand and it was held that for completing the assessment under section 148 of the Act, compliance with the procedure of issue of notice under Section 143 (2) was mandatory. This position of law has been further clarified by Delhi high Court in the case of Alpine Electronics Asia Pvt. Ltd. v/s. DCIT (2012) 341 ITR 247 (Del).
It has been also contended by ld DR that assessee attended the assessment proceedings regularly and never objected regarding issue and service of notice u/s143(2) so the default can be treated as procedural irregularity u/s 292BB of the Act. We note that as per the provision of section 292BB where an assessee had appeared in any proceedings or cooperated in any enquiry relating to an assessment or re-assessment, it shall be deemed that any notice under any provision of this Act which is required to be served upon him, has been duly served upon him in time in accordance with the provision of this Act. The provision of section 292BB clearly
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta laid down the circumstances/conditions under which the deeming fiction has to come into force. These conditions have been stated to be as (a), (b) and (c) which talks about the situation where: (a) notice was not served upon the assessee, (b) not served upon him in time, and (c) served upon him in an improper manner respectively. Therefore, section 292BB talks about only the situation where the assessee raises the issue of non-service of notice and still co-operates with the Department. The issuance of statutory notice cannot be dispensed with by the co- operation of the assessee. Since this notice 143(2) forms the basis for the Assessing Officer to assume jurisdiction under respective sections. To support this proposition, we rely on the decision of P & H High Court in the case of CIT v/s Cebon India Ltd (2012) 347 ITR 583 wherein it has been categorically held that absence of a statutory notice under section 143(2), cannot be held to be curable u/s 292BB of the Act.
To conclude, this is an undisputed position of fact, as far as the present case is concerned, that Assessing Officer failed to issue a notice to the Assessee under section 143(2) of the Act. The Assessee made a request before the assessing officer that the original return filed should be treated as return filed in response to notice under section 148 of the Act. Ld. assessing officer has unequivocally admitted in his Remand Report that no notice was issued (not available on record) u/s 143(2) of the Act. The assessee has also stated that he never received notice u/s 143(2) of the Act. These averments remained uncontroverted. This default of non-issue of notice u/s 143(2) of the Act is fatal to the order of re-assessment and have rendered the whole reassessment proceeding void-ab-initio being without jurisdiction. Any assessment framed without issue of notice u/s 143(2) suffers from jurisdictional defect. In view of facts of this case, we are of considered view that reassessment order was passed without jurisdiction and bad in law. Hence, the assessment framed by the assessing officer under section 143(3) r.w.s 147 of the Act is quashed, and therefore, we allow the appeal of the assessee.
Since, we have allowed the appeal of the assessee on legal issue (non- issuance of notice under section 143(2) of the Act) therefore appeal filed by the
ITA.1503 & 1461/AHD/2017 Assessment Year.2007-08 Shri Deepak S. Mehta Revenue in ITA No.1503/Ahd/2017 becomes infructuous, hence does not require adjudication, therefore we dismiss the appeal filed by the Revenue.
In the result, the appeal of the Revenue in (ITA No.1503/AHD/2017 for AY.2007-08) is dismissed and appeal of the Assessee in (ITA No.1461/AHD/2017 for AY.2007-08) is allowed.
Order is pronounced on 22/09/2021 by placing result on Notice Board.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat �दनांक/ Date: 22/09/2021 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File
By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat