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Income Tax Appellate Tribunal, ‘’ SMC’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-6, Ahmedabad dated 26/02/2018 ( in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s.143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dt.14/03/2016 relevant to the Assessment Year 2008- 2009.
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The assessee has raised the following grounds of appeal. 1. The order passed by the Ld.CIT(A) is against the law, equity and justice. 2. The Ld. CIT(A) has erred in law and on facts in considering the validity of assesment by ignoring the binding decisions of jurisdictional High Court when no notice issued U/S 143(2) of Act. 3. The Ld. CIT(A) has erred in law and on facts uphelding the validity of reopening of assessment when no sanction has been obtained as prescribed U/S 151 of Act. 4. The Ld. CIT(A) has erred in law and on facts uphelding the order of Ld. A.O. when there is violation of natural justice. 5. The Ld. CIT(A) has erred in law and on facts in not considering the submission of appellant in toto and ignoring the manorial evidence on record and uphelding the addition made U/S 68 of Act of Rs.35,00,000/-. 6. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal.
The 1st issue raised by the assessee is general in nature. Therefore we do not find any reason to adjudicate the same. Accordingly, we dismiss the ground of appeal of the assessee.
The 2nd issue raised by the assessee is that the Ld. CIT-A erred in upholding the assessment framed under section 143(3) read with section 147 of the Act though the statutory notice under section 143(2) of the Act was not issued upon the assessee.
The assessee before the Ld. CIT (A) has raised the objection upon validity of the impugned assessment on the ground that the statutory notice under section 143(2) of the Act was not issued upon it. Accordingly, the assessee claimed that the assessment framed under section 143(3) read with section 147 of the Act vide order dated 14-03-2016 is not sustainable and thus liable to be quashed.
However the Ld. CIT-A observed that the assessee has appeared during the assessment proceedings and raised no objection raised before the AO regarding the issuance of notice under section 143(2) of the Act. Accordingly, the Ld. CIT (A) was of the view that the assessment proceedings under section 143(3) read
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with section 147 of the Act cannot be held as invalid in pursuance to the provisions of section 292BB of the Act. Thus the Ld. CIT (A) held that in a situation where notice is not served or not served on time or served in a improper manner viz a viz the assessee does not raise objection before the completion of the assessment, then the assessment cannot be construed as invalid on account of non-issuance of notice under section 143(2) of the Act.
5.1 The Ld. CIT-A accordingly disregarded the argument raised by the assessee on validity of the assessment order framed by the AO without issuing mandatory notice under section 143(2) of the Act and upheld the assessment proceedings.
Aggrieved by the order of the Ld. CIT-A, the assessee is in appeal before us.
The Ld. AR for the assessee before us filed a paper book running from pages 1 to 89. The Ld. AR has pointed out that the assessment order was framed under section 143(3) read with section 147 of the Act without issuing notice under section 143(2) of the Act. The Ld. AR for the assessee also submits that the return of income has been filed on dated 19-06-2015 in response to the notice under section 148 of the Act which is available on page no 1 to 3 of the paper book.
On the other hand the Ld. DR before us submitted that the assessee did not raise any objection on the issuance of notice under section 143(2) of the Act during the assessment proceedings. Therefore the assessee is precluded from raising such objection during the appellate proceedings in pursuance to the provisions of section 292BB of the Act. The Ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions and perused the materials available on record. The issue in the instant case raises two situations as detailed under:
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1- Whether the assessment made under section 143(3) read with section 147 of the Act without issuing the notice under section 143(2) is valid. And 2- Whether the provision of section 292B is attracted in the given facts and circumstance so as to make the assessment valid. 9.1 Admittedly, the return was filed by the assessee in response to the notice issued under section 148 of the Act. The return filed under section 148 of the Act is deemed to have filed under section 139 of the Act. Therefore all the provision specified under section 139 of the Act comes into play to a return filed under section 148 of the Act. The relevant provisions of section 148 of the Act read as under: [Issue of notice where income has escaped assessment. 148. [(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve49 on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 :]
9.2 We further note that the expression used under section 148 of the Act i.e. “so for as may be” has been interpreted by the Hon’ble Apex court in the case of R Dalmia Vs. CIT reported in 236 ITR 480, that once the return filed under section 148 of the Act then in making the assessment and the reassessment under section 147 of the Act the provisions subsequent to the provision of section 139 of the Act has to be followed. The relevant extract of the judgment is reproduced as under: “It is no doubt that assessments under section 143 and assessments and reassessments under section 147 are different, but in making assessments and reassessments under section 147 the procedure laid down in sections subsequent to section 139, including that laid down by section 144B, has to be followed”
From the above judgment, there remains no ambiguity that the procedural provisions for making the assessment under section 143(3) of the Act has to be followed. Therefore, it is mandatory upon the Revenue to ensure the service of
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notice under section 143(2) of the Act even in the assessment framed under section 147 of the Act.
9.3 We also find support and guidance from the order of Special Bench of Delhi in the case of Raj Kumar Chawla v/s ITO reported in 145 Taxman 12 wherein it was held as under: “Section 148 does not provide any methodology for computing the income on reassessment or assessment. On the contrary, it creates a legal fiction that such return shall be treated as one made under section 139. By the creation of such legal fiction all the procedures prescribed in and subsequent to section 139 automatically apply in toto. It is a settled principle that a legal fiction has to be taken to its logical conclusion and, therefore, what is valid for a return under section 139 will be valid with equal force to a return filed under section 148. Therefore, the proviso will apply to a return filed in response to notice under section 148. Clause (b) of section 158BC specifically talks of the applicability of section 142, sub-sections (2) and (3) of section 143. There is an omission of sub-section (1) of section 143. This Chapter clearly prescribes its own return, form of own methodology for computation of income but falls back on the provisions of sections 142, 143 and 144 etc., only for procedural aspect. If the proviso is made applicable, then a clash erupts between the provisions of Chapter XIV-B with section 143(2) as the assessment is mandatory under this Chapter. [Para 31”
We also find support and guidance from the judgment of Hon’ble Kerala High Court in the case of Lally Jacob v/s ITO reported in 197 ITR 439 wherein it was held as under: “A reading of sections 147 and 148 makes it clear that, at any rate, an assessment for the first time made by resort to section 147 is a regular assessment. Section 148 enjoins the Income-tax Officer before making an assessment under section 147 to serve a notice on the assessee containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139. The further provision in that section is very significant which provides that the aforesaid notice has to be treated as if it is a notice under section 139(2) and that all the provisions of the Act shall apply to the subsequent procedure and the final assessment. In other words, the notice issued under section 148 has to be deemed to be a notice under section 139(2) and, if the other provisions of the Act have to be applied, an assessment in pursuance of that can be made only under section 143 or section 144. We were not shown any other provision by which the Income- tax Officer is authorised to make an order of assessment under the Act. The provisions contained in section 140A also give an indication that an assessment made in pursuance of a notice under section 148 is a regular assessment under section 143 or section 144, for section 140A(2) provides that any admitted tax paid in pursuance of section 140A(1) shall be deemed to have been paid towards the regular assessment under section 143 or section 144. It is pertinent to note that section 140A(1) deals with a return required to be furnished under section 139 or section 148. That makes the provision clear that an assessment made under section 147 also will be a regular assessment under section 143 or section 144. Accordingly, we hold that any assessment made for the first time by resort to section 147 will also be a regular assessment for the purpose of invoking section 217 of the Act. With great respect, we dissent from the view expressed in certain decisions referred to earlier in this judgment which take a contrary view." (p. 452)”
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Thus in view of the above we conclude that the AO was under the obligation to issue a notice under section 143(2) of the Act for making the assessment or reassessment as the case may be. But the AO has not done so. Accordingly, the order framed under section 143(3) read with section 147 of the Act becomes invalid.
We further note that the provisions of section 292BB of the Act deals with the situation where notice is not served or not served on time or served in a improper manner viz a viz the assessee does not raise objection before the completion of the assessment. As such, the provision of section 292BB of the Act does not deal about the issuance of notice. In the present case, the issue is whether the assessment framed under section 147/143(3) of the Act is valid without the issuance of the mandatory notice under section 143(2) of the Act. Accordingly we hold that, the provision of section 292BB of the Act does not extend any benefit to the Revenue.
In holding so we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of PCIT v/s Marck Biosciences Ltd. reported in 106 Taxmann.com 399 wherein it was held as under; “The facts as emerging from the record show that it is an admitted position that no notice under section 143(2) had been issued after the assessee informed the Assessing Officer to treat the earlier return of income as the return filed in response to the notice under section 148 of the Act. In other words, no notice under section 143(2) was issued after the filing of the return of income. The question that, therefore, arises for consideration is whether the assessment order framed under section 143(3) read with section 147, would be rendered invalid in the absence of a notice under section 143(2) of the Act? On a plain reading of provision of section 143(2), it is manifest that it contemplates that when an assessee files a return under section 143 and the Assessing Officer finds that any claim as described therein is inadmissible, he is required to serve a notice to the assessee specifying particulars of such claim and a date on which he should produce or cause to be produced, any evidence or particulars specified therein on which the assessee may rely in support of such claim. Further, from the language employed in section 292BB of the Act, it emerges that a notice would be deemed to be valid in the three circumstances provided therein, namely, where the assessee has participated in the proceedings it would not be permissible for him to raise objection that (i) the notice was not served upon him; or (ii) was not served upon him in time; or (iii) was served upon him in an improper manner
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Thus, all the circumstances contemplated under section 292BB of the Act are in a case where a notice has been issued, but has either not been served upon the assessee or not served in time or has been served in an improper manner. The said provision clearly does not contemplate a case where no notice has been issued at all In the facts of the present case, if the contention of the assessee were to be accepted, it would amount to dispensing with the notice under section 143(2) of the Act in view of the fact that it is an admitted position that no such notice had been issued after the return of income was filed by the assessee. After the filing of the return of income, unless a notice under section 143(2) of the Act is issued to the assessee, he would have no means of knowing as to whether or not the Assessing Officer has accepted the return of income as filed by him. As held by the Supreme Court, omission to issue a notice under section 143(2) is not a procedural irregularity and is not curable. It is, therefore, mandatory to issue notice under section 143(2) of the Act. Section 292BB provides for a deeming provision that any notice under any provision of the Act, which is required to be served upon the assessee, has been duly served upon him in time, in accordance with the provisions of the Act. This section would be applicable where a notice has, in fact, been issued and a contention is raised that such notice has not been served upon the assessee or has not been served in time or has not been served properly, namely, where there is a defect in the service of notice. This provision does not apply to a case where no notice has been issued at all. In the facts of the present case, at the cost of repetition, it may be stated that no notice under section 143(2) has been issued after the assessee had filed its return of income and hence, section 292BB would not be attracted. In the light of the fact that non-issuance of a notice under section 143(2) is not a procedural irregularity, the same cannot be cured under section 292BB of the Act and hence, the assessment order passed without issuance of notice under section 143(2) would be rendered invalid. The Tribunal as well as the Commissioner (Appeals), therefore, did not commit any error in holding that the notice issued prior to the filing of the return of income was invalid and that, in absence of a valid notice under section 143(2) the assessment order was rendered invalid.”
12.1 We also find important to refer the judgment of Hon’ble Gujarat High Court in the case of CIT Vs. Panorama Builders Pvt. Ltd. reported in 45 taxmann.com 159 wherein it was held as under: “14. Therefore, we are of the considered opinion that section 292BB does not apply to issuance of notice, neither it cures the defect or enlarges statutory period where a mandatory notice under section 143(2) of the Act is required to be issued within limitation fixed under the Act. In absence of issuance of the notice under the proviso to section 143(2) of the Act within a period of 12 months from the end of the month in which return was furnished by the assessee, the proceedings initiated by the Assessing Officer with regard to block assessment period 1.4.1997 to 25.7.2002 on the basis of notice issued on 6.7.2006 under section 143(2), after about 20 months, was time barred and the entire proceedings in pursuance of such notice is null and void.”
In view of the above, we conclude that there was not issued the statutory notice under section 143(2) of the Act within the prescribed time. The Ld. DR has also not brought anything on record contrary to the arguments advanced by the Ld. AR for the assessee. Thus in the absence of the statutory notice, the assessment
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framed under section 143(3)/147 of the Act is not sustainable. Hence the ground raised by the assessee is allowed.
12.2 As we have addressed the technical issue raised by the assessee, accordingly we refrain ourselves from adjudicating the issue raised by the assessee on merit. As such the issues raised by the assessee on merit become infructuous and no separate adjudication is required. Accordingly we dismiss the issues raised by the assessee on merit.
In the result the appeal filed by the assessee is allowed in part.
Order pronounced in the Court on 20/01/2020 at Ahmedabad.
-Sd- -Sd- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 20/01/2020 manish