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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals), Gandhinagar (CIT(A)’ in short), dated 07.01.2017 arising in the assessment order dated 18.02.2016 passed by the Assessing Officer (AO) under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act) concerning AY 2008-09.
2. The ground of appeal filed by the assessee reads as under:
“1. The Ld. CIT(A) has erred in confirming the addition made at R.S. 15,05,500/- without appreciating the facts and submissions including page 1 upto 86 as filed before him and therefore, it is prayed that the addition made is required to be deleted.
That, without prejudice, the whole proceedings started by issuing notice u/s 148 dated 27-03-2015 is itself bad in law, void, ab initio and illegal and liable to be quashed.
3. That, the proceeding under 148 is itself bad in law and void in absence of any notice u/s 143(2) as not issued after the return of income buy the Appellant on 05-01-2016 and therefore, the proceeding is bad in law and void.
4. That, further the proceeding u/s 148 is bad in law and void since there is no such approval on record as per sec. 151 of the Income Tax Act.”
When the matter was called for hearing, the learned AR for the assessee referred to the reasons recorded and challenged the validity of assumption of jurisdiction under s.147 of the Act. The learned AR for the assessee submitted that the AO has wrongfully usurped jurisdiction under s.147 of the Act contrary to the mandate of law for as many as three reasons; (i) the reasons recorded do not meet the requirement of law under s.147 of the Act, (ii) the approval given by the superior authority under s.151 of the Act is without any date and therefore it is not known whether such approval has been obtained after the issuance of notice under s.148(2) of the Act or prior thereto & (iii) Notice under s.143(2) of the Act has been admittedly not issued by the AO while finalizing the assessment under s. 147 of the Act appealed against. We shall deal with nuances of the arguments advanced on behalf of the assessee on the above propositions at appropriate place.
The learned DR for the Revenue, on the other hand, pointed out that notice under s.143(2) of the Act was not necessary in the instant case. The learned DR pointed out that notice under s.148 of the Act was issued to the assessee on 27.03.2015 on a definite information towards huge cash deposit in the vicinity of Rs.15 Lakhs in the saving bank account. The assessee has not filed any return of income within the specific time despite issuance of notice under s. 148 of the Act. Notice under s.142(1) of the Act was thereafter issued on 22.06.2015 for the purposes of assessment. The assessee filed return of income for AY 2008-09 on 05.01.2016 in response to notice under s.148 of the Act. Hence, notice under s.142(1) of the Act predates the filing of return under s.148 of the Act. It was contended that, in the circumstances, where the assessee was nonchalant towards performing his responsibilities, non-issuance of notice under s.143(2) of the Act is not at all a valid reason to challenge the re-assessment proceedings. Reliance was placed on the decision of Hon’ble Delhi High Court in the case of CIT vs. Madhya Bharat Energy Corporation Ltd. (2012) 337 ITR 389 (Del).
We have carefully considered the rival submissions and perused the case records as adverted too by the respective sides.
The validity of re-assessment order framed under s.143(3) r.w.s. 147 of the Act as well as validity of issuance of notice under s.148 of the Act for making re-assessment under s.147 of the Act is in controversy. Before we proceed to deal with jurisdictional aspect, it will be pertinent to reproduce the reasons recorded under contemplation:
As per the AIR information available in this office, it is found that assessee has made cash deposit of Rs.15,05,500/- in his saving bank account during the year under consideration. Accordingly, letter has been issued to the assessee on 05.03.2015 for verification of payment of tax related to such transaction which has been duly served upon the assessee. In response to the same the assessee has not furnished any reply till date. In view of the above facts, I have reason to believe that income chargeable to tax is escaped assessment to the extent of Rs.15,05,500/- as stated above. Hence, notice u/s 148 is required to be issued in this case for A.Y.2008-09.
On a reading of the reasons recorded, it is noticed that the assessee had deposited Rs.15,05,500/- in cash in saving account for which no trail is available. The assessee has simultaneously not filed return of income.
Therefore, the AO, in our view, rightly formed reason to believe that chargeable income has escaped income in the absence of return of income. The belief appears to be held in good faith based upon reasonable grounds and cannot be reckoned to be a mere pretense. The conditions did exist for reopening the assessment based on such grounds. As per the Section 147 of the Act, what is required is reason to believe but not the established fact of escapement of income. At the stage of issue of notice, the only question relevant would be, whether there was a relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove the escapement of income is not a matter of concern at that stage as held by the Hon’ble Supreme Court in ACIT vs. Rajesh Javeri Stock Brokers Pvt. Ltd. [2007] 291 ITR 500 (SC). The first plea of the assessee capsuled above is thus found to be without merit.
However, on a further perusal of approval and memo obtained under s.151 of the Act, we notice indeed that while granting approval under s.151 of the Act marking ‘yes’ showing its purported satisfaction towards escapement of income, it is not discernible as to the date on which such approval was obtained. We find a clear case of remissness on the part of the JCIT in remaining silent on the date of approval. The approval under s.151 of the Act is statutory in nature and a pre-condition to enable the AO to put the proceedings under s.147 of the Act in operation. In the absence of any date, it will be difficult to speculate the actual date of approval. The approval, if granted, after the issuance of notice under s.148 of the Act would be a nullity in law. The onus was on Revenue to establish that the approval was taken prior to the issuance of notice under s.148 of the Act. The onus remains undischarged. Therefore, approval granted by the JCIT cannot be reckoned to be a valid approval in the peculiar facts.
We now advert to the third aspect of the plea for invalidity of Section 147 of the Act proceedings i.e. whether the issue of notice under s.143(2) of the Act within time is a sin qua non for proceedings further for reassessment pursuant to notice under s.148 of the Act. It is the case of Revenue that since the requirement if Section 147/Section 148 of the Act are duly met with, the provisions of Section 143(2) of the Act are rendered procedural and does not affect the validity of the assessment. The identical issue arose before the co-ordinate bench in DCIT vs. Shri Parimal Sureshbhai Patel order dated 28.02.2019. The relevant operative para of the order of the co-ordinate bench is reproduced hereunder:
“5. We have carefully considered the rival submissions and perused the orders of the authorities below and material placed on record.
6. At the outset, we find substantial merit in the legal plea raised on behalf of the assessee. The assessee has claimed that no notice under s.143(2) of the Act has been issued to the assessee to enable the Revenue to frame the re-assessment order under s.143(3) r.w.s. 147 of the Act. In this regard, we find no reference to the issuance of such notice under s.143(2) of the Act in the re-assessment order. We also notice that CIT(A) has requisitioned the assessment records and has come to a categorical finding that no such notice under s.143(2) of the Act has been issued. The Revenue could not bring anything to contradict the allegation of non issuance of notice. It will be appropriate to reproduce the relevant finding of the first appellate authority in this regard: “4.2. I have considered the facts of the case and submission made by the appellant. It has been noticed that in this case notice u/s.148 of the I.T. Act have been issued on 18.3.2014 to file the return of income and incompliance thereto the appellant vide his reply in Tapal on 24.4.2014 has stated that the original return filed by him on 17.12.2009 vide acknowledgement No.0024600236 may be treated as return filed in compliance to the notice issued u/s.148 of the T.T. Act. He also enclosed a copy of the acknowledgment of the original return of income filed. The appellant has objected the reassessment completed by the A.O. for the reason that no notice u/s. 143(2) has been issued by him after initiation of reassessment proceedings which is against the provisions of law. In support of non-service of the notice u/s.143(2) of I.T. Act, the appellant also submitted an affidavit duly notarized with regard to the grounds so raised. In support he has relied upon various judgments holding the mandatory requirement of the issuance of notice u/s.143(2) on the given facts. 4.3. Considering the appellant's objection through filing the affidavit, the records were gone through and it is noticed that there was no mention about the issuance of notice u/s. 143(2) and service thereof upon the appellant in the body of assessment order. To verify the contention of the appellant, further the assessment records from the A.O. i.e. DC1T, Circle-5(2), Ahmedabad were also requisitioned through this office letter dtd.28.4.2015 and in response to the same the assessment records were produced by the A.O. on 13.5.2015. On going through the assessment record, it was noticed that no notice u/s.143(2) of I.T. Act had been issued after initiation of the re- assessment proceedings in appellant's case. The contention of the appellant is found correct and the objection of the A.O. is having substance. It is mentioned that non issue of notice is not a curable defect 292BB of the I.T. Act and therefore the reassessment completed is not found in accordance with the provisions of law. Therefore, the reassessment completed is bad in law. Reliance is placed on the following judgments.
- The Hon'ble 1TAT, Delhi Bench in the case of DCIT Vs. Silver Line in and 1506/Del/2013 dtd.26.9.2014 has held that non issue of notice u/s. 143(2) renders u/s. 147 assessment void. Section 292BB does not apply. If there is a conflict of judicial opinion the view in favour of the assessee must be taken.
- The Hon'ble ITAT Delhi in the ease of UKT Software Technologies Pvt. Ltd. Vs. ITO Wd-18(1), New Delhi in & 5294/Del/20lO dtd.11.2.2011 has held that if the assessment is framed u/s.143(3) either read with Section 158 BC or Section 147 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.
- The Hon'ble ITAT Delhi in the case of ITO Vs. M7s. Staunch Marketing Pvt. Ltd. in dtd. 12.5.2015 has held that for completing the assessment u/s.148 the compliance of the procedure laid down u/s.143(2) is mandatory. If there is failure on the part of the A.O. for not complying with the procedure laid down in Section 143(2) then the reassessment is not sustainable in the eyes of law and deserves to be cancelled.
- The Hon'ble ITAT, Agra Bench in the case of ITO Vs. Alligarh Auto Centre 152 ITJ (Agra) 767 has also held the similar views.
- The Hon'ble ITAT Mumbai Bench in the case of Sanjeev R. Arora Vs. ACIT in IT(SSA) No.l03/MUM/2004 dtd. 25.7.2012 has also held as under:-
"We are of the view that the reassessments made for the assessment years under consideration have become invalid for not having served the mandatory notice u/s. 143(2) of IT. Act on the assessee"
- The Hon'ble Madras High Court in the case of C1T Vs. C. Pakniappan 284 ITR 257 has also held that the reopening of assessment of assessee u/s. 147 and completion of assessment without issue of notice u/s.143(2) within 12 months would not be valid. - The Hon'ble Madras High Court in the case of CIT Chennai Vs. Alstom T&D India Ltd. in Tax Case (Appeals) No.1183 and 1186 of 2006 dtd. 3.9.2012 has held that even where assessee requested AO to treat the original return as one in response to Section 148 proceedings notice u/s.143(2) was mandatory otherwise reassessment would be bad in law.
- The Hon'ble Bombay High court in the case of ACIT Cir.2(1), Panaji Vs. Jeno Pharmaceutieals Ltd. in Tax Appeals No.75 to 78 of 2012 dtd. 14.2.2013 has held that notice u/s. 143(2) is mandatory and in absence of such service AO cannot proceed to make an inquiry on return file in compliance with notice issued u/s. 148.
- The Hon'ble Madras High Court in the case of CIT Vs. K.S. Mangudi (2008) 304 ITR 388 and also in other case namely CIT Vs. M. Chellappan (2006) 281 ITR 444 has held that where there is no well service of notice u/s. 143(2) within the time limit the assessment was found invalid.
- The Hon'ble Guhawati High Court in the case of CIT Vs. Deep Baruah (2010) 329 ITR 362 has held that the reassessment is bad in law for lack of notice u/s.143(2)of I.T. Act.
- The Hon'ble Bombay High Court in the case of CIT Vs. Salman Khan in Income-tax Appeal(L) No.2362 of 2009 dtd. 1.12.2009 has held that for failure to issue notice reassessment held to be not valid. Section 292BB does not have retrospective effect.
- The Hon'ble ITAT Mumbai Bench in the case of Ramesh Abaji Walavalkar Vs. Addl.CIT (2012) 54 SOT 15 (URO) has also held that reassessment made by the AO u/s. 143(3) r.w.s. 147 without issuing notice u/s. 143(2) is invalid.
- The Hon'ble ITAT Kochin Bench in the case of B.R. Sreekumar Vs. ITO (2012) 136 ITD 257 (TM) has held that issue of notice u/s. 143(2) is mandatory which has to be issued before passing assessment order.
- The Hon'ble Delhi High Court in the case of Alpine Electronics Asia Pvt. Ltd. Vs. DCIT (2012) 341 ITR 247 has even held that delay in issue of notice u/s. 143(2) in reassessment proceedings renders assessment invalid.
- The Hon'ble Delhi ITAT in the case of Shri Mohinderkumar Chhabra in has held that reassessment completed without issue of notice u/s, 143(2) of I.T. Act was invalid hence the same was quashed and consequently the assessment order passed in pursuance thereto was also cancelled.
- The Hon'ble ITAT Bangalore in the case of Shri G.N. Mohana Raju Vs. ITO in and 243/Bang/2013 dated November, 2014 has also held that in absence of issuance of issue of valid notice u/s. 143(2) of I.T. Act the assessment renders it invalid and the ITAT quashed the reassessment. - The Hon'ble Gujarat High Court in the case of CIT Vs. K.M. Ravji in Tax Appeal No.771/2012 dtd. 18.7.2011. - The Hon'ble Gujarat High Court in the case of CIT Vs. Panorama Builders Pvt. Ltd. in Tax Appeal No.435/20ll dtd. 30.8.2012. In view of the aforesaid discussion, the ground of appeal is allowed.”
7. In view of the decision of the Hon’ble Gujarat High Court in the case of Sukhini P. Modi (supra) and other hosts of judgments, the legal challenge that re-assessment order which is subject matter of appeal as void ab initio is well settled. In the absence of notice under s.143(2) of the Act issued to assessee, the re-assessment order passed under s.144 r.w.s. 147 of the Act dated 26.03.2015 in question is rightly held to be without authority of law and consequently rightly quashed by the CIT(A).”
As noted above, return filed in response to notice under s.148 of the Act is deemed to be return filed under s.139 of the Act and all the provisions of the Act shall apply accordingly. As a consequence, the notice of assessment has to be necessarily issued as mandated under s.143(2) of the Act insofar as the return filed in response to Section 148 of the Act is concerned. The Hon’ble Gujarat High Court in CIT vs. Sukhini P. Modi (2014) 367 ITR 682 (Guj) has taken note of the decision of Hon’ble Supreme Court in ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC) and held that reassessment would not be valid without following the procedure prescribed for issuance of notice under s.143(2) of the Act. We prefer to follow the decision rendered by the jurisdictional High Court in preference to the decision of the Hon’ble Delhi High Court in Madhya Bharat Energy Corporation Ltd. (supra) relied upon on behalf of the Revenue more so for the reason that the decision of Hon’ble Supreme Court in Hotel Blue Moon (supra) has not been brought to the notice of the Hon’ble Delhi High Court. Therefore, failure to issue notice under s.143(2) of the Act has rendered the re- assessment bad in law where the return filed has been acted upon for the purposes of reassessment. Hence, the reassessment order passed under s.143(3) r.w.s. 147 of the Act dated 18.02.2016 appealed against deserves to be quashed.
In the result, the appeal filed by the assessee is allowed on preliminary legal ground alone without going into merits of the case.
This Order pronounced in Open Court on 17/01/2020 Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 17/01/2020 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।