M/S. VANSA PROPERTIES PVT. LTD.,KOLKATA vs. I.T.O., WARD - 10(2), KOLKATA, KOLKATA

This appeal in for A.Y. 2012-13 is preferred by the assessee against the order of the Commissioner of Income Tax, National Faceless Appeal Centre, Delhi (NFAC) [Ld. CIT in short], dated 10.11.2022. The assessee has raised the following grounds of appeal:

The assessee is a company which is engaged in the business of trading of shares. The return of income for the year under consideration was filed by it on 27.09.2012 by declaring loss of Rs. 61,66,215/-. The return was duly processed u/s 143(1) of the Act and subsequently information received from the Director of Income-tax (Inv.), Ahmedabad that misuses of CCM facility that is Client Code Modification for the tax evasion purpose through the broker M/s. Amrapali Aadya Trading & Investment Pvt. Ltd. and for this purpose, a show cause notice was issued upon the assessee stating that why factitious loss of Rs. 13,43,059/- showed by the assessee should be disallowed. In response to such show cause notice, assessee had filed its objection which was duly considered by the AO. However, doing so, an amount of Rs. 13,43,059/- was added to the total income of the assessee.

Dissatisfied with the above order, assessee preferred an appeal before the ld. CIT(A) wherein the ld. CIT(A) dismissed the appeal filed by the assessee.

We after hearing the rival submission of the parties and perused the material available on record. We find that Hon’ble Apex Court in the case of Asst. Commissioner of Income Tax vs Hotel Blue Moon reported in 321 ITR 362 has held that procedure of section 143(2) is mandatory and to be followed in an assessment, Hon’ble Apex Court held as under:  “While notice u/s 143(2) is not necessary if the AO accepts the return as filed, the notice within the prescribed time is mandatory if the AO proposes to make an assessment u/s 158BC r.w.s. 143(3). Omission to issue notice u/s 143(2) is not a procedural irregularity and the same is not curable and the requirement of notice u/s 143(2) cannot be dispensed with. If the intention of the legislature was to exclude the provisions of section 143(2) legislature would have indicated that 4 M/s. Vansa Properties Pvt. Ltd. A.Y. 2012-13  In Circular No. 717 dated 14.08.1995, the CBDT has directed that the AO “shall proceed to determine the undisclosed income of the block period and the provisions of section 142, sub-section (2) and (3) of section 143 and section 144 shall apply accordingly.” This circular clarifies the requirement of law in respect of service of notice u/s 143(2). The circular is binding on the department though not on the court.”

In view of the above admitted facts that no notice u/s 143(2) of the Act was issued during the proceedings pending u/s. 148 of the Act within the prescribed time from the date of filing of return. The ratio laid down by Hon'ble Apex Court in the case of Hotel Blue Moon (supra), we are of the considered view that the reassessment framed without issuing notice u/s. 143(2) of the Act within the prescribed time limit from the date of filing of return is without jurisdiction. Section 143(2) incorporates the rule of audi alterem partem i.e., no man should be condemned unheard. The words "shall serve on the assessee notice" occurring in section 143(2) imply a duty to be performed and the word "shall" connotes that the provisions are mandatory and non-compliance of the same goes to vitiate the order of assessment itself. The legal ground raised by the assessee is accordingly allowed.

Keeping in view the decision rendered above on the legal issue quashing the assessment order made by the AO u/s 147/144, the other issues raised by the assessee in this appeal have become infructuous or academic in nature and therefore, we do not consider it necessary or expedient to adjudicate upon the same.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11.05.2023