HIMAYATH MD ALI,MAHABUBNAGAR vs. ITO,WARD- 1, MAHABUBNAGAR

Thereafter, the AO vide his order passed under section 147 r.w.s 144 r.w.s 144B of the Act, dated 29/03/2022 determined the income of the assessee at Rs.1,41,14,986/- after making two additions, viz., (i) deposits of Rs.1,40,95,055/- made in the assessee’s bank account, i.e., (a) Andhra Bank: Rs.79,85,025/-; and (b) State Bank of India: Rs.61,10,030/-; and (ii) interest income: Rs.19,931/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.

The assessee, aggrieved with the order of the CIT(A) has carried the matter in appeal before us.

We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.

Shri Vishnu Teja, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, assailed the validity of the order passed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 29/03/2022. Elaborating on his contention, the Ld. AR submitted that the assessee in response to the notice issued under section 148 of the Act, dated 31/03/2021, had filed his return of income on 24/03/2022, declaring an income of Rs.4,73,830/-, but the AO had most arbitrarily discarded the same and framed the assessment under section 144 of the Act. The Ld. AR took us through the copy of the return of income a/w its acknowledgement at Page 30-31 of APB. The Ld. AR submitted that as the assessee prior to the framing of the assessment by the AO vide his order passed under section 147 r.w.s. 144 r.w.s 144B of the Act, dated 29/03/2022 had filed his return of income on 24/03/2022, thus, he was obligated to have considered the said return of income and issue a notice under section 143(2) of the Act and consequently frame the assessment vide an order passed under section 143(3) of the Act. The Ld. AR submitted that the failure on the part of the AO to issue notice under section 143(2) of the Act goes to the very root of the validity of the jurisdiction assumed by the AO for framing the impugned assessment, which, thus cannot be sustained and is liable to be struck down on the said ground itself. The Ld. AR to buttress his contention had relied upon the judgment of the Hon’ble High Court of Patna in CIT-11, Patna vs. Nagendra Prasad, Miscellaneous Appeal No.662 of 2014, dated 02/08/2023. The Ld. AR had drawn our attention to the aforesaid judgment wherein it was observed by the Hon’ble High Court that where an assessee had filed his return of income in response to notice under section 148 of the Act, though delayed, the AO is obligated to issue notice under section 143(2) of the Act as has been so held by the Hon’ble Supreme Court in the case of ACIT vs. Hotel Blue Moon (2010) 321 ITR 362 (SC). Carrying his contention further, the Ld. AR submitted that as the AO in the present case had failed to issue notice under section 143(2) of the Act, and framed the assessment under section 147 r.w.s 144 r.w.s 144B of the Act, dated 29/03/2022, the said order in absence of valid assumption of jurisdiction was liable to be struck down.

Per contra, Shri Mohan Babu, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) relied upon the orders of the authorities below. The Ld. Sr. DR submitted that as the assessee has not only failed to scrupulously comply with the notice issued under section 148 of the Act, as per which the return of income was statutorily required to be filed within a period of 30 days from the date of receipt of notice by him, but even otherwise had filed the same at the fag end of the assessment proceedings on24/03/2022, as a result whereof there was no occasion for the AO to take cognizance of the said return of income and issue notice under section 143(2) of the Act. The Ld. Sr-DR submitted that as the contention advanced by the assessee’s counsel regarding the validity of the jurisdiction assumed by the AO for framing the assessment vide his order passed under section 147 r.w.s 144 r.w.s 144B of the Act, dated 29/03/2022 was devoid and bereft of any substance, the same does not merit acceptance.

We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.

Admittedly, it is a matter of fact borne from record that the AO had issued notice under section 148 of the Act on 31/03/2021 to the assessee calling upon him to file his return of income within a period of 30 days from the date of receipt of the said notice. However, we find that not only the assessee had failed to comply with the aforesaid notice and not filed his return of income within the stipulated time period, but for the reasons best known to him had filed the same only on 24/03/2022, i.e., at the fag end of the assessment proceedings.

Although, we principally concur with the Ld. AR that in a case where an assessee has filed the return of income in response to a notice issued under section 148 of the Act, the AO is statutorily obligated to issue a notice under section 143(2) of the Act and frame the consequential assessment, but find that the assessee in the present case before us, had filed the return of income in response to notice under section 148 of the Act, dated 31/03/2021 after a lapse of a period of one year from the date of the subject notice, i.e., at the fag end of the assessment proceedings. We are of firm conviction that as the assessee had filed the return of income only on 24/03/2022, i.e., after the closure of the proceedings on 23/03/2022 and five days prior to the framing of the assessment by the AO vide his order passed under section 147 r.w.s. 144 r.w.s 144B of the Act, dated 29/03/2022, the aforesaid claim regarding the validity of the assessment so framed cannot be accepted. We thus, in terms of our aforesaid observations, are of firm conviction that considering the totality of the facts involved in the case before us, i.e., the date of issuance of notice under section 148 of the Act, dated 31/03/2021, filing of return of income in response thereto on 24/03/2022, closure of the assessment proceedings on 23/03/2022, and framing of the assessment vide assessment order under section 147 r.w.s. 144 r.w.s 144B of the Act, dated 29/03/2022, the Ld. AR’s contention regarding the invalid assumption of jurisdiction by the AO for framing the assessment does not merit acceptance.

At the same time, we are of the view that as the assessee during the pendency of the impugned assessment had filed the return of income on 24/03/2022, which has not been considered by the AO while framing the assessment vide his order passed under section 147 r.w.s 144 r.w.s 144B of the Act, dated 29/03/2022, the matter in all fairness and interest of justice, merits to be set aside to his file with a direction to frame the de novo assessment after considering the aforesaid return of income available on his record. Needless to say, the AO shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee.

In the result, appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.