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Income Tax Appellate Tribunal, ‘’C’’ BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The three appeals are filed by the Revenue and the CO is filed by the Assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals)-2 Ahmedabad, [Ld. CIT (A) in short] dated 13/09/2016, 02/05/2017 & 22/08/2016 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") dated 17/08/2016 & 24/11/2015 relevant to Assessment Year
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2008-09. The assessee has filed Cross Objection in the Revenue’s appeal bearing ITA 2854/Ahd/2016 for the Assessment Year 2008-09.
First, we take up the Cross Objection bearing No. C.O. 13/Ahd/2019 filed by the assessee. The assessee has raised the following grounds in its Cross Objection. 1. That the ld.CIT(A) erred in law and facts of the case by dismissing the appeal of the appellant without appreciating the fact that the notice u/s.147 of the Act has been issued on the basis of information from investigation wing and it is bad in law and void ab intio.
That the ld.CIT(A) erred in law and in the facts of the case by dismissing the ground of the appellant even though no notice u/s.143(2) of the Act has been issued by the A.O. while framing assessment u/s.143(3) r.w.s 147 of the Act. 2. At the outset, we note that there was the inordinate delay in filing the CO by the assessee for 785 days. Therefore, the assessee moved a condonation petition by way of furnishing the affidavit duly notarized dated 19 February 2019 stating that it succeeded in the appeal filed by it before the learned CIT (A). Therefore, it was under the impression that there is no need to file any appeal/cross objection against the appeal filed by the Revenue against the order of the ld. CIT-A. However, at the time when the appeal of the Revenue came up for the hearing, it was realized to file the cross objection against the appeal of the Revenue. Accordingly, the assessee approached to the counsel /advocate for filing the CO before the ITAT.
2.1 The assessee also filed the affidavit of the chartered accountant duly notarized dated 27 February 2019 who appeared before the learned CIT (A). The counsel for the assessee in the affidavit submitted that the operation of
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the company had almost closed down and there was nobody available to handle day to day activity of the assessee. Therefore, nobody from the side of the assessee approached to him for any advice against the appeal filed by the Revenue. Moreover, the learned counsel for the assessee also admitted in his affidavit that as the assessee succeeded before the CIT (A), he was under the impression that no cross objection is required to be filed before the ITAT. It is only when the matter came for hearing before the ITAT, he realized to file the CO against the appeal filed by the Revenue.
In view of the above, the assessee submitted that there was a bona-fide mistake committed by it in filing the CO beyond the due date. Accordingly it prayed to condone the delay in filing the CO.
On the other hand, the learned DR, considering the reason for the delay in filing the CO, left the issue at the discretion of the bench.
We have heard the rival contentions of both the parties and considered the reasons in the application filed by the assessee for condoning the delay of 785 days in filing the CO. Now the controversy arises for our adjudication whether such inordinate delay in filing the CO by the assessee in the given facts and circumstances is reasonable and sufficient cause for condoning the delay.
4.1 In this regard we note that the Hon’ble Madras High Court in the case of Sreenivas Charitable Trust v. Dy. CIT reported in 280 ITR 357 has held that : “3. The Supreme Court in Vedabai v. Shantaram Baburao Patil [2002] 253 ITR 798held as under :
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"In exercising discretion under section 5 of the Limitation Act the Courts should adopt a pragmatic approach. A distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days. Whereas in the former case the consideration of prejudice to the other side will be a relevant factor so the case calls for a more cautious approach but in the latter case no such consideration may arise and such a case deserves a liberal approach. No hard and fast rule can be laid down in this regard. The Court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression ‘sufficient cause’, the principle of advancing substantial justice is of prime importance." (p. 799)
The Calcutta High Court in CIT v. Orissa Concrete & Allied Industries Ltd. [2003] 264 ITR 186 held as under : ". . .what is really indicated in the various decisions cited and in section 5 of the Limitation Act itself, is that a litigant would be required to explain why the appeal and/or application could not be filed within the period prescribed by limitation and explain the delay for such period for the purpose of linking up the circumstances which had caused the delay during the period of limitation and thereafter." (p. 192)
Recently, the Allahabad High Court in Ganga Sahai Ram Swarup v. ITAT [2004] 271 ITR 512 has taken the view that liberal view ought to have been taken by the authority as the delay was only of a very short period and the appellant was not going to gain anything from it.
Applying the ratio laid down by the Apex Court as well as various High Courts, we find, it is stated in the petition filed by the assessee for condonation of delay that the order copy was misplaced and thereafter it was found and sent to counsel for preparing the appeal and then, the appeal was prepared and filed before the Tribunal and in that process, the delay of 38 days occurred. As held by the Apex Court, no hard and fast rule can be laid down in the matter of condonation of delay and the Courts should adopt a pragmatic approach and the Courts should exercise their discretion on the facts of each case keeping in mind that in construing the expression "sufficient cause" the principle of advancing substantial justice is of prime importance and the expression "sufficient cause" should receive a liberal construction. We are, therefore, of the opinion that the Appellate Tribunal ought to have condoned the delay in filing the appeal, considering the reasons given by the assessee for the delay.”
From the above it is clear that the expression "sufficient cause" should be interpreted to advance substantial justice. Therefore, advancement of substantial justice is the prime factor while considering the reasons for condoning the delay.
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4.2 We also note that the case on merit appears to be in favour of the assessee. But there is a technical defect in the CO since the same was not filed within the period of limitation. There was the affidavit filed by the assessee explaining the reasons for the delay in filing the CO before us. However, the Revenue has not filed any counter-affidavit to deny the allegation made by the assessee.
4.3 It is also important to note that Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down certain principles for considering the condonation petition for filing the appeal which are reproduced hereunder: (1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. From the above judgment of the Hon’ble Apex Court, we note that the substantial justice deserves to be preferred rather than deciding the matter on the basis of technical defect.
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4.4 We also note that there is no allegation from the Revenue that the CO by the assessee was not filed within the time deliberately. Therefore, we are inclined to prefer substantial justice rather than technicality in deciding the issue.
4.5 We also find that if we reject the application of the assessee for condoning the delay then it would amount to legalize injustice on technical ground whereas the Tribunal is capable of removing injustice and to do justice. The copies of the affidavit of the assessee and the learned counsel for the assessee are available on record. Considering the nature of the delay in filing the CO and no objection from the revenue, we condone the delay. Accordingly, we proceed to adjudicate the issue on merit.
The assessee in the first ground of CO has challenged the proceedings under section 147 of the Act which was based on the information received from the Invetigation wing.
At the outset the learned counsel for the assessee submitted that he has been instructed not to press ground No. 1 challenging the initiation of proceedings under section 147 of the Act. Accordingly we dismiss the same as not pressed.
The issue raised by the assessee in ground No. 2 is that the learned CIT (A) erred 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 by the AO.
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The assessee before the ld. CIT-A submitted that the AO has never issued notice u/s 143(2) during the re-assessment proceeding which is pre- requisite to frame an assessment order. Accordingly assessee prayed that the impugned assessment order should be cancelled. The assessee in this regard placed his reliance on Hon’ble SC judgment in case of ACIT vs. Hotel Blue Moon 229 CTR 219 and various other judgments.
However, the ld. CIT (A) on the submission filed by the assessee called for the remand report from AO who submitted that during the assessment proceeding assessee did not take any stand in this regard. Therefore in light of provision of section 292-BB of the Act, the assessee claim is not tenable. The AO, further placed his reliance on Hon’ble Delhi HC judgment in case of MTNL vs. Chairman CBDT 246 ITR 173, Madras HC decision in case of Arvea T & D India ltd. vs. ACIT 294 ITR 233.
8.1 The ld CIT-A after considering the submission of assessee and remand report, rejected the contention of the assessee and confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A), the assessee is in the CO before us.
The learned AR for the assessee before us reiterated the submissions as made before the learned CIT (A) whereas the learned DR vehemently supported the order of the authorities below.
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We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 148 of the Act states that the return filed in response to the notice issued under section 148 of the Act shall be subject to the provisions applicable to the return as furnished under section 139 of the Act.
11.1 Similarly, the provisions of section 143(2) of the Act mandates that, where a return has been furnished under section 139 of the Act or in response to the notice issued under section 142(1) of the Act, the AO if considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid tax in any manner, he shall serve a notice upon the assessee.
11.2 A conjoint reading of both the provisions makes compulsory to issue a notice under section 143(2) of the Act in respect of the proceedings initiated under section 147 of the Act. In this regard, we find support and guidance from the judgement of Hon’ble Gujarat High Court in case of PCIT vs. Marck Bioscinces Ltd reposted in [2019] 106 taxmann.com 399 (Gujarat) wherein it was held as under: “20. In the facts of the present case also, if the contention of the appellant 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 in the above decision, omission to issue a notice under section 143(2) of the Act is not a procedural irregularity and is not curable. It is, therefore, mandatory to issue notice under section 143(2) of the Act. 21. At this juncture, reference may also be made to the contents of the Central Board of Direct Taxes Circular No.549 dated 31.10.1989, which finds reference in the decision of this Court in case of Mahi Valley Hotels & Resorts (supra), which has been reproduced in paragraph 8.5 hereinabove. A perusal of the above circular
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indicates that if an assessee, after furnishing the return of income, does not receive a notice under section 143(2) of the Act from the Department within the prescribed period, then he can take it that the return filed by him has become final and no scrutiny proceedings could be started in respect of that return. This is the kind of significance that has been attached to a notice under section 143(2) of the Act by the Central Board of Direct Taxes itself. 22. Section 292BB of the Act 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. In the opinion of this Court, 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) of the Act has been issued after the assessee had filed its return of income and hence, section 292BB of the Act would not be attracted.”
11.3 Thus, we note that the AO can acquire the jurisdiction for the assessment under section 147 of the Act only if the notice under section 143(2) was issued upon the assessee. In the absence of issuance of such notice, the proceedings initiated under section 147 of the Act are void-ab- initio. Such defect cannot be cured even under the provisions of section 292 BB of the Act. It is because the provision of section 292BB of the Act deals with the service of the notice. The relevant provision of section 292BB of the Act reads as under: “Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was— (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.”
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11.4 The provision of section 292-BB of the Act nowhere talks about the issuance of notice. Thus, where the statutory notice has not been issued by the income tax authorities, then the question of acquiring the jurisdiction in the proceedings initiated under section 147 of the Act does not arise. In this regard, we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of Marck Bioscinces Ltd (supra).
11.5 We also draw support and guidance from the order of the ITAT Bangalore ‘C’ Bench in case of ACIT vs. Ashed Properties & Investment (P.) Ltd reported in 62 taxman.com 340 wherein it was held as under: “with regard to applicability of provisions of section 292BB. It is clearly from the statutory provisions that these provisions only insulate the Assessing Officer from the proof of service of notice under section 143(2). It does not in any way insulate the Assessing Officer from default in issuing notice under section 143(2) within the period of limitation contemplated therein. When the records show that there was no issue of notice under section 143(2) within the period of limitation prescribed under the said proviso, the revenue cannot take advantage of the provisions of section 292BB. In other words, 'issue of notice' and 'service of notice' are two different aspects and what is covered by section 292BB is only 'service of notice'. Non-issue of notice under section 143(2) within the period of limitation would not be covered under the ambit of section 292BB. The decision of the Tribunal in the case of Amithi Software Technologies (P.) Ltd. v. ITO [IT Appeal No. 540 (Bang.) of 2012, dated 7-2-2014] clearly supports the plea of the assessee in this regard. Therefore, assessment proceedings are invalid for the reason that notice under section 143(2) had not been issued and served within the time limit prescribed by those provisions. Accordingly, the order of assessment is annulled”
The learned DR, appeared on behalf of the revenue, has not brought anything on record contrary to the arguments advanced by the learned AR for the assessee.
In view of the above, we hold that the assessment framed under section 147 of the Act without issuing notice under section 143(2) of the Act is not
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sustainable. Accordingly, we quash the same. Hence, the ground raised by the assessee in the CO is allowed.
In the result, the CO of the assessee is partly allowed.
Coming to the Revenue’s appeal bearing ITA No. 2854/AHD/2016 for the assessment 2008-09 13. At the outset, we note that we have already held that the assessment framed under section 147 read with section 143(3) of the Act vide order dated 24-11-2015 is not sustainable in the CO filed by the assessee in the paragraph No. 11 & 12 of this order. As the assessment itself has been held as invalid, the appeal filed by the Revenue is not maintainable. Accordingly we dismiss the same.
In the result, the appeal filed by the Revenue is dismissed.
Coming to the Revenue’s appeal bearing ITA No. 1809/AHD/2017 and 1810/AHD/2017 for the assessment 2008-09
At the outset, we note that we have already held that the assessment framed under section 147 read with section 143(3) of the Act vide order dated 24-11-2015 is not sustainable in the CO filed by the assessee in the paragraph No. 11-12 of this order. However, the question arises whether the penalty can be levied for the contravention of the provisions of section 269 SS and 269 T of the Act under section 271D and 271E of the Act in a situation where assessment framed under section 147 of the Act is unsustainable. The answer stands in favor of the assessee as there was no proceeding under the Act. The
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question of the penalty does not arise in the proceedings of the assessment which has been held invalid in the present case. In this regard we draw the support and the guidance from the judgment of Hon’ble Delhi High Court in the case of CIT Vs. Standard Brands Limited reported in 285 ITR 295 wherein it was held as under: “7. On these facts, we are of the view that the Revenue could not on the one hand, contend that the amount of Rs. 3 lakhs is undisclosed income in the hands of the assessee and at the same time seek to initiate proceedings against the assessee for violation of the provisions of section 269SS of the Act which deals with cash deposits or loans in excess of Rs. 20,000. 8. The Revenue, having taken the stand that the income was undisclosed income in the hands of the assessee, it could not resort to proceedings under section 269SS read with section 271D of the Act, as held by the Tribunal. 9. Additionally, we agree with learned counsel for the assessee that since a block assessment could not be sustained, penal action may be permissible (if at all) only after a regular assessment is made.” In view of the above, we hold that as the assessment itself has been held as invalid and therefore the penalty arising in such assessment are not sustainable. Accordingly, we are of the view the appeals filed by the Revenue are not maintainable. Hence, we dismiss the same.
In the result, the appeals of the Revenue stand dismissed.
In the combined result, the CO of the assessee is partly allowed whereas the appeals of the Revenue are dismissed.
Order pronounced in the Court on 22/10/2019 at Ahmedabad. -Sd- -Sd- (WASEEM AHMED) (MAHAVIR PRASAD) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 22/10/2019 manish