M/S BHAVAL SYNTHETICS (INDIA) LTD.,UDAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, AJMER

At the outset, the ld. AR submitted that the assessee does not wish to press ground No. 1 (2) and additional ground of appeal No. 2 hence, these two grounds of appeal are dismissed as not pressed by the assessee.

Briefly, the facts of the case are that the assessee had filed its return of income on 22.10.2013 claiming loss of Rs. 1,88,72,993/-and the assessment was completed U/s 143(3) on 13.01.2016 assessing total loss at Rs. 1,87,60,143/-. Subsequently, proceedings U/s 147 of the Act were initiated and notice U/s 148 was issued on 14.06.2017 which was duly served on the assessee-company on 16.06.2017. In response to the same, the assessee-company did not file any return of income and accordingly, notice U/s 142(1) was issued on 11.12.2018 as 3 M/s Bhaval Synthetics (India) Ltd. vs. ACIT to why the assessment should not be completed U/s 144 as no return was filed by the company in compliance to notice U/s 148 of the Act. In response to notice u/s 142(1), the assessee company submitted that it has filed its return of income on 12.12.2018 in compliance to the notice U/s 148 of the Act. The Assessing officer held that since return of income was filed much beyond the statutory time period of 30 days of having received the notice issued U/s 148 on 16.06.2017, the same cannot be given any cognizance. The AO accordingly proceeded to pass the best judgment assessment U/s 144 r.w.s. 143(3)/147 allowing only the current year loss of Rs. 1,87,60,143/-, as originally assessed u/s 143(3), which was allowed to be carry forward to the subsequent assessment years.

Against the aforesaid order and findings of the AO, the assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A) returned the finding that no substantive grievance arise to the assessee from the order of the Assessing Officer as only finding of the Assessing Officer is that only loss pertaining to A.Y. 2013-2014 and not of any earlier years can be carry forward which is very position taken by the assessee in the return filed U/s 148 on 12.12.2018 and accordingly technical objections to issuance of notice u/s 148 were dismissed as infructuous and the appeal of the assessee was dismissed.

During the course of hearing, the ld. AR submitted that in response to notice U/s 148 of the Act, the assessee filed its return of income on 12.12.2018 however, the AO did not issue any notices U/s 143(2) and proceeded to complete assessment U/s 144 r.w.s. 4 M/s Bhaval Synthetics (India) Ltd. vs. ACIT 147/143(3) on 28.12.2018. It was submitted that in completing the assessment U/s 143(3) of the Act, it is mandatory to issue and serve notice U/s 143(2) of the Act within 6 months from the end of the relevant assessment year and since no notice u/s 143(2) was issued by the AO U/s 143(2) of the Act, the reassessment so completed was without jurisdiction, invalid and bad in law and deserves to be quashed. In support, reliance was placed on the decision of the Hon’ble Rajasthan High Court in case of Pr. CIT- III vs. Kamla Devi Sharma (DB Appeal No. 197/2018 dated 10.07.2018).

Per contra, the ld. DR submitted that in response to notice U/s 148 of the Act, since the assessee did not file any return of income within stipulated period of time, the same was not given any cognizance and the reassessment was completed U/s 144 of the Act. It was accordingly submitted that where the return of income has not been filed and the best judgment order has been U/s 144 of the Act, there is no legal necessity to issue notice U/s 143(2) of the Act. It was further submitted that the ground so taken by the assessee is purely academic in nature as no substantive grievance arises to the assessee from the order of the AO as held by the ld. CIT(A) in para 6.2 of her order which reads as under:-

We have heard the rival contentions and perused the material available on record. As per the Assessing officer, in compliance to notice u/s 148, no return of income has been initially filed and thereafter, in response to notice u/s 142(1), the return of income which has been filed on 12.12.2018 is much beyond the statutory time period of 30 days of having received the notice u/s 148 and the return so filed cannot be given any cognizance and he therefore proceeded to pass the best judgment order u/s 144 without taking cognizance of the return of income so filed by the assessee. As per ld DR, in such circumstances, where the return of income has not been taken cognizance of and the best judgment order has been passed U/s 144 of the Act, there is no legal necessity to issue notice U/s 143(2) of the Act. It has been further contended that no prejudice has been caused to the assessee by non- issuance of notice u/s 143(2) as in the impugned order u/s 148, the only finding of the A.O is that only losses for A.Y 2013-14, and not of 6 M/s Bhaval Synthetics (India) Ltd. vs. ACIT any earlier years, can be carried forward, which is the very position taken by the assessee in the return so claimed to be filed u/s 148 on 12.12.2018. However, as per the ld AR, in response to notice U/s 148 of the Act, the assessee filed its return of income on 12.12.2018 however, the AO did not issue any notice U/s 143(2) and proceeded to complete reassessment U/s 144 r.w.s. 147/143(3) on 28.12.2018 and in absence of notice u/s 143(2), the reassessment order so passed cannot be sustained and is bad in law and deserve to be quashed.

There is no dispute on the legal proposition that where the return of income has been filed in response to notice u/s 148, the provisions of the Act shall apply as if such return was a return required to be furnished under section 139 of the Act. In the instant case, the Assessing officer has not taken cognizance of the return of income so filed by the assessee on 12.12.2018 stating that such a return of income has been filed beyond the stipulated time frame of thirty days as specified in the notice u/s 148 for filing such return of income. In our view, such a return of income even though filed belatedly would still qualify as return furnished under section 139 of the Act and should therefore be taken cognizance of by the Assessing officer. Even where it is held that no return of income has been filed in response to notice u/s 148, the return of income so filed on 12.12.2018 shall be taken as return filed in response to notice u/s 142(1) dated 11.12.2018 and therefore, in either case, the return of income has to be taken cognizance of by the Assessing officer. Where the return of income has been filed u/s 139 or in response to notice u/s 142(1), where the Assessing officer finds that there are certain matters which require 7 M/s Bhaval Synthetics (India) Ltd. vs. ACIT explanation by the assessee, then in such cases, he has to comply with the provisions of section 143(2) of the Act which reads as under:

As per the aforesaid provisions, the legal necessity to issue notice u/s 143(2) arises where the Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner. In the instant case, it is an admitted and undisputed position that in the return of income filed by the assessee, it has claimed losses of Rs 1,88,72,993/- pertaining to A.Y 2013-14 only and has not claimed any losses of Rs 1,77,38,920 pertaining to A.Y 2005-06 to be carry forward. The reason for initiating the reassessment proceedings u/s 147 was precisely the said wrong and incorrect claim of carry forward of losses for A.Y 2005-06 while filing the original return of income on 22.10.2013 which was assessed u/s 143(3) dated 13.01.2016. Therefore, the assessee by filing the return of income and not claiming the carry forward of losses pertaining to A.Y 2005-06 has admitted to 8 M/s Bhaval Synthetics (India) Ltd. vs. ACIT the wrong claim made and assessed earlier. Thereafter, the reassessment has been completed u/s 147 where the only finding of the A.O is that only losses for A.Y 2013-14, and not of any earlier years, can be carried forward accepting the very position taken by the assessee in the return so filed on 12.12.2018. Therefore, in the facts of the present case, where the return filed by the assessee has been accepted and the reassessment order has been passed u/s 147 accepting the returned income and there is no variation or addition made by the Assessing officer to the returned income, we donot see any necessity for the Assessing Officer to call for the explanation from the assessee and for the purposes, issue notice u/s 143(2) of the Act.

In case of Kamla Devi Sharma (supra), relied upon by the ld AR, the facts of the case were that in compliance to notice u/s 148, the assessee had filed a return of income declaring income of Rs 139,300/- and thereafter, the Assessing officer completed the assessment u/s 147 r/w 143(3) making the addition of Rs 1,01,20,000/- by treating the investment in purchase of land as unexplained. In that case, we therefore, find that the Assessing officer had made the addition to the returned income and therefore, it was necessary that before making such an addition, he should have issued a notice u/s 143(2) and having failed to issue such a notice, the Coordinate Bench had quashed the reassessment proceedings and which was later affirmed by the Hon’ble Rajasthan High Court. We therefore find that the facts in the said case are distinguishable and therefore, don’t support the case of the assessee. 9 M/s Bhaval Synthetics (India) Ltd. vs. ACIT 11. In light of above discussions and in the entirety of facts and circumstances of the case, where the reassessment order has been passed u/s 147 accepting the returned income, we don’t see any infirmity in the order so passed in absence of notice u/s 143(2) of the Act as there is no legal necessity as so envisaged as applicable in the facts of the present case and the same is hereby affirmed. In the result, sole ground of appeal is dismissed.