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Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
Before: DR. B.R.R. KUMAR & SHRI YOGESH KUMAR U.S.
ORDER PER YOGESH KUMAR U.S.:J.M. The above appeals filed by the assessee against the orders of learned CIT(A)-1, Jabalpur all dated 19/02/2018 for the assessment years 2009-10 to 2012-13. The assessee has raised common grounds in all the appeals, which are reproduced as under:
“1. That, on the facts and circumstances of case, the assessment order passed by the Ld. AO u/s. 147/143(3) of the IT Act, is without jurisdiction as the "reasons to believe" to reopen the assessment were not supplied to the assessee, despite being requested by the assessee. This is gross violation of the principle laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. DCIT (2003) 259 ITR 19 (SC). Thus, the Hon'ble CIT is not justified in confirming the order of the Ld. AO on this point.
That, on the facts and circumstances of case, the assessment order passed by the Ld. AO u/s. 147/143(3) of the IT Act, is in defiance of law, as the mandatory compliance of issuing and serving the notice u/. 143(2) of the Act upon the assessee was not complied with. Thus, the Hon'ble CIT erred in law in confirming the order of the Ld. AO on this point.
3. That the Hon'ble CIT is not justified in estimating and presuming the net profit of the assessee at the rate of 3% of turnover.” 2. The issue of validity of the assessment order issued in the absence of issuance of notice u/s 143(2) of the Act stands adjudicated by this Tribunal in a number of cases. Since the jurisdictional issue is apparent on the face of the record available before us, the case is being adjudicated.
In all the above four appeals the learned counsel for the assessee submitted that the assessment order passed by the Assessing Officer 147/143(3) of the Act is erroneous as mandatory compliance of issue of service of notice u/s 143(2) of the Act upon the assessee was not complied with, therefore, submitted that the impugned assessment orders are liable to be set aside.
We have heard the learned A.R. and carefully perused the materials available on record. It is imperative from the record that the assessee has not been issued with the notice u/s 143(2) of the Act. The said fact of non-issuance of notice u/s 143(2) of the Act has been admitted by learned CIT(A) in its order. We have also gone through the assessment order and other materials and found that no notice u/s 143(2) of the Act was issued to the assessee.
It is now well settled law that if the notice u/s 143(2) of the Act is not issued to the assessee before completion of the assessment, then the assessment is not sustainable in the eyes of law and deserve to be cancelled as held by the various judgments of the Hon’ble Supreme Court, Hon’ble Jurisdictional High Court, other High Courts and Special Benches decision of the ITAT. The relevant portion of the various judgments of the Hon’ble Courts are reproduced as under:-
5.1 ACIT & Anr. vs. Hotel Blue Moon: [(2010) 321 ITR 362 (SC)] Held: “It is mandatory for the AO to issue notice u/s 143 (2). The issuance and service of notice u/s 143 (2) is mandatory and not procedural. If the notice is not served within the prescribed period, the assessment order is invalid Reassessment-----Notice-----Assessee intimating original return be treated as fresh return---Reassessment proceedings completed despite assessee filing affidavit denying serviced of notice under section 143(2)---- Assessing Officer not representing before Commissioner (Appeals) that notice had been issued---- Reassessment order invalid due to want of notice under section 143(2)--- Income-tax Act, 1961, ss. 143, 147, 148(1), prov.-- --ITO v. R.K. GUPTA [308 ITR 49 (Delhi)Tribu.,” 5.2 DIT vs. Society For Worldwide Interbank Financial Telecommunications in ITA 441 OF 2010 (Delhi High Court) [(2010) 323 ITR 249] “The notice u/s 143(2) was issued on 23-03-2000 while the return was filed on 27-03-2000. Even if it was issued on 27-03-2000 without examining the return, it was invalid. The notice was invalid and so was the assessment.” 5.3 DCIT vs. Indian Syntans Investments (P) Ltd. [(2007) 107 ITD 457 (Chennai)] Validity of reassessment order - Non-service of notice under s.143(2) – “The amended Proviso to s.148 of the Income Tax Act 1961 was not applicable in case where the assessee was not served a notice under s.143(2) of the Act. The reassessment made in such a case was invalid S.143(2) and s.148 of the Income Tax Act 1961.” 5.4 CIT vs. M/s Panorama Builders Pvt. Ltd. in Tax Appeal no. 435 of 2011 of Hon'ble Gujarat High Court Issue Involved:
"Whether non-issuance of the notice u/s 143(2) within the prescribed time, made the whole block assessment order null and void and bad in law, despite the assessee not having raised any objection before the passing of the assessment order and despite the provisions of section 292BB of the Act? " Held: “In this case, Hon'ble High Court has held that section 292BB cures the defects in service of notice but section 292BB is 'confined to only service of notice under this Act and this section does not apply to 'Issuance of notice' under the provisions of Act. It does not lay down that if a mandatory notice is required to be issued by the assessing officer and it has not been issued within the period of limitation fixed under the law, then such notice shall be deemed to have been issued within time. It has been further held that resort cannot be taken by the Revenue to section 292BH to give a go-bye to mandatory requirement of issuance of notice within the statutory fixed by the proviso to section I43(2) of the Act.” 5.5 CIT vs Rajeev Sharma 336 ITR 678, High court of Allahabad. “In view of above submissions and case laws, it has been established that no notice u/s 143(2) was issued in the present case and therefore the impugned assessment is liable to be annulled.” 5.6 M/s Sapthagiri Finance and Investments vs. ITO: TC(A). No. 159 of 2006 dated 17.07.2012 (Mad HC) [(2013) 90 DTR (Mad) 289] Relevant para reproduced here under: "13. As far as the present case is concerned, the provisions of Section 148 also uses the expression "so far as may be apply accordingly as if such return were a return required to be furnished under Section 139". Thus, understanding this provisions in the background of the decision of the Apex Court, on the facts available, we are of the view that in completing the assessment under Section 148 of the Act, compliance of the procedure laid down under Sections 142 and 143 (2) is mandatory. On the admitted fact that beyond notice under Section 142(1), there was no notice issued under Section 143(2), and in the light of the fact that the very basis of the reassessment was the failure on the part of the assessee in not disclosing the capital gains arising on the transfer of property for assessment and that admittedly the assessee had requested the officer to accept the original return as a return filed in response to Section 148 of the Act, we hold that there was total failure on the part of the Revenue from complying with the procedure laid down under Section 143(2) of the Act, which is mandatory one as held by the Apex Court.” 5.7 Alpine Electronics Asia Pte Ltd. vs. DGIT & Ors: [(2012) 341 ITR 247 (Del) Held: “The service of notice u/s 143(2) within the statutory time limit is mandatory and is not an inconsequential procedural requirement. Omission to issue notice u/s 143 (2) is not curable and the requirement cannot be dispensed with. S. 143(2) is applicable to proceedings u/s 147 & 148.” 5.8 CIT vs. Pawan Gupta & Ors. [(2009) 318 ITR 322 (Del) Hon'ble Delhi High Court held in Para 38 of the order observed as under:- "Thus, we are of the clear view that where the assessing officer is not inclined to accept the return of undisclosed assessment filed by the assessee issuance of a notice under section 143(2) is a prerequisite for framing the block assessment order under chapter XlV B of the Income Tax Act, 1961. We are also of the view that if an assessment order is passed in such a situation without complying with section 143(2), it would be invalid and not be merely irregular."
5.9 The Madras High Court held likewise in Sapthagiri Finance & Investments v. ITO (2013) 90 DTR 289 (Mad). The facts of that case were that a notice under Section 148 of the Act was issued to the Assessee seeking to reopen the assessment for AY 2000-01. However, the Assessee did not file a return and therefore a notice was issued to it under Section 142 (1) of the Act. Pursuant thereto, the Assessee appeared before the AO and stated that the original return filed should be treated as a return filed in response to the notice under Section 148 of the Act. The High Court observed that if thereafter, the AO found that there were problems with the return which required explanation by the Assessee then the AO ought to have followed up with a notice under Section 143(2) of the Act. It was observed that:
"Merely because the matter was discussed with the Assessee and the signature is affixed it does not mean the rest of the procedure of notice under Section 143(2) of the Act was complied with or that on placing the objection the Assessee had waived the notice for further processing of the reassessment proceedings. The fact that on the notice issued u/s 143(2) of the Act, the assessee had placed its objection and reiterated its earlier return filed as one filed in response to the notice issued u/s 148 of the Act and the Officer had also noted that the same would be considered for completing of assessment, would show that the AO has the duty of issuing the notice under Section 143(3) to lead on to the passing of the assessment. In the circumstances, with no notice issued u/s 143(3) and there being no waiver, there is no justifiable ground to accept the view of the Tribunal that there was a waiver of right of notice to be issued u/s 143(2) of the Act." 5.10 The interplay of Sections 143 (2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court. In CIT v.Rajeev Sharma (2011) 336 ITR 678 (All.) it was held that a plain reading of Section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under Section 143(2) of the Act. It was observed:
"the provisions contained in sub-Section (2) of Section 143 is mandatory and the legislature in their wisdom by using the word 'reason to believe' had cast a duty on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. In view of the above, after receipt of return in response to notice under Section 148, it shall be mandatory for the AO to serve a notice under sub-Section 2 of Section 143 assigning reason therein. In absence of any notice issued under sub-Section 2 of Section 143 after receipt of fresh return submitted by the Assessee in response to notice under Section, the entire procedure adopted for escaped assessment, shall not be valid."
Considering the above facts and circumstances and the judicial precedents and in the background of aforesaid discussions, we are of the considered opinion that the issuance of notice u/s 143(2) is mandatory and non-compliance of the same will result in nullifying the assessment orders impugned before us.
We are also conscious about the provision of section 292BB of the Act. The said Section 292BB of the Act deals with (a) non service of notice (b) non service of notice in time (c) service of notice in an improper manner- but in the present case the issue is regarding non-issuance of notice itself and there is nothing on record to prove that the notice u/s 143(2) of the Act has been issued by the Assessing Officer. Therefore, in our considered opinion, the protection under section 292BB of the Act is not available to the Department in the case on hand.
Considering the fact that the Department has not produced any evidence to show that the notice u/s 143(2) of the Act has been issued to the assessee, the assessment orders passed for the assessment years 2009-10 to 2012-13 are hereby quashed. The Revenue is given liberty to file M.A. for recalling this order if in case the Revenue is able to produce the evidence regarding the issuance of notice u/s 143(2) of the Act to the assessee. Accordingly, we allow the ground No. 2 of the above captioned appeals of the assessee and quash the assessment orders for assessment years 2009-10 to 2012-13. In the result, appeals filed by the assessee are partly allowed.
In the result, the appeals filed by the assessee are partly allowed.