BENCHMARK BUILDCON PRIVATE LIMITED,MUMBAI vs. ITO, WARD-4(1)(3), MUMBAI, MUMBAI

The grounds of appeal are as under:

That reassessment proceedings u/s 148 of the Act were initiated in the case of assessee company despite the fact that the case of assessee company do not fall in the criteria of selection of cases u/s 148 as specified by Honourable CBDT vide Instructions in this regard.

That the reassessment proceedings undertaken by Ld. AO are further illegal and not tenable under the law because no Document Identification Number (DIN) was generated for the reasons recorded on which approval was obtained for reopening of assessment proceedings u/s 148 of the Act.

That the reassessment proceedings are further not sustainable under the law because of being initiated mechanically relying on borrowed information that too only on reasons to suspect.

That Ld. AO grossly erred in law and in facts of the case in assessing sale proceeds of investment of Rs. 1,87,15,000/- as unexplained cash credits u/s 68 of the Act.

That Ld. AO grossly erred in law and in facts of the case in making addition of Rs. 1,54,85,000/- being advances received by assessee company which were refunded during the year under consideration itself.

That the additions made by Ld. AO u/s 68 of the Act are further not tenable under the law because of being made without issue of mandatory SCN in this regard.

Briefly stated facts are that the assessee filed Return of income for relevant assessment year disclosing total income of Rs. 9,85,580/-. Subsequently, notice u/s 148 of the Act was issued and in response to notice same return was requested to treat the original return. According to the AO, the notice generation button u/s 143(2) of Act was not active, therefore, notice u/s 143(2) could not be generated in this case. The assessee company is involved in building of complete constructions or part thereof and Civil Engineering Work. Information was received from the Departmental sources that the assessee had received certain payments from a few entities i.e. M/s Icebit Reality Pvt Ltd Rs. 50,00,000/-, from M/s Adamina Traders Pvt Ltd Rs 56,00,000/-and from M/s Abjayoni Trading Pvt Ltd Rs. 2,36,00,000/-,aggregating to Rs 3,42,00,000/-. The AO observed that above named concerns were not involved in genuine business activity and had made suspicious transaction with various parities including the assessee. It claimed that the transactions were duly recorded in the books of accounts but did not furnish copy of ITR, Copy of bank statements and thus, failed to establish creditworthiness and genuineness of the aforesaid transaction along-with documentary evidence despite given sufficient opportunities of hearing. The onus lay with the assessee to file valid ITR, reply and evidences in support of P a g e | 4 A.Y. 2017-18 transaction/ income online. The AO further observed that as per the original return, the assessee company had not got the accounts audited u/s 44AB of the Act, the sales of goods shown and purchases were only Rs.1,50,000/- and Rs.22,92,528/- respectively from which it was inferred that the assessee had very small level of business activity. The impugned amounts were not its business receipt. Notices u/s 133(6) of the Act were issued to above three companies which were not responded.Therefore, the total amount of Rs. 3,42,00,000/- credited in the books of account was treated as cash credit for the year under consideration and added to the total income of the assessee u/s 68 of the Act.

Aggrieved by the assessment order, the assessee filed appeal before the ld.CIT raising various legal grounds as also on merit. According to the appellate authority,the first original ground challenged the validity of the reassessment proceedings on the ground that the notice under Section 148 of the Act dated 31st March 2021 was allegedly issued and served on 1st April 2021. The second original ground challenged the reassessment order on the ground that it was allegedly passed without issuing the mandatory notice under Section 143(2) of the Act. However,the ld.CIT(A) dismissed all such grounds and also upheld the addition made on merits.In so far as the legality of the P a g e | 5 A.Y. 2017-18 assessment order in view of non issuance of notice u/s 143(2) of the Act,he held the notice to be valid stating that the assessee was issued several notices u/s 142(1) and other notices which were not complied. Besides, the assessee never raised such issues before the AO during assessment proceedings.It is also stated that the purpose of issuing notice under Section 143(2) was fully achieved. Also section 292BB of the Act provides that where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment, 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 that the notice was not served upon him or was not served upon him in time or was served upon him in an improper manner. This provision is clearly applicable to the present case. Therefore,the provisions of section 292BB were clearly applicable.

1 On merits, he upheld the addition of Rs 3,42,00,000/- observing that the AO has rightly made the addition after considering all the facts and circumstances of the case. The assessee was required to prove three things: the identity of the creditor, the creditworthiness of the creditor, and the genuineness of the transaction. In the present case,

Before us, the ld.AR has at the outset argued on the ground no.2 claiming that in the absence of notice u/s 143(2) of the Act which was also not disputed by both the lower authorities, the assessment order is ab initio invalid. The ld. Counsel submitted that notice u/s. 143(2) of the Act is mandatory and in the absence of issue and service of notice the reassessment made u/s. 143(3) r.w.s. 147 of the Act is bad in law. The said is mandatory and absence of notice cannot be held to be curable defect u/s. 292BB of the Act even though assessee participated in the assessment proceedings before the AO. He placed reliance on various decisions of courts in support of the contentions. Per contra, the ld.DR placed reliance on the orders of the authorities below.

We take up the above ground relating to the non issuance of notice u/s 143(2) of the Act as the same affects the very validity of the assessment order. We have heard the rival submissions, perused the orders of the authorities below and the case laws relied on. The assessee's contention that no notice was issued u/s. 143(2) of the Act and therefore, the assessment made u/s. 143(3) r.w.s. 147 of the Act is invalid was not accepted by the ld.CIT(A) placing reliance on the provisions of section 292BB of the Act. Here the issue on hand is, whether the order passed by the Assessing Officer is valid without issuing notice u/s.143(2) of the Act. There is no dispute that the impugned notice was not issued by the AO on the ground that due to certain technical glitch on the e-portal.

1 It is a settled proposition of law that the notice under section 143(2) of the Act is mandatory and requirement of issuing the same, cannot be waived off, as has been held in the case of Assistant P a g e | 8 A.Y. 2017-18 143(2) cannot be dispensed with.The Hon'ble Bombay High Court in the case of ACIT v. Geno Pharmaceuticals Ltd. 214 taxmann 83 (Bom) held as under: -

So far as Tax Appeals No.77/2012 and 78/2012 are concerned, in both these appeals, the ITAT has held that the issuance of notice after reopening of the case was mandatory and this order is under challenge. It is contended that the said order is contrary to the provisions of Sections 292BB which was introduced by the Finance Act 2008 w.e.f. 01.04.2008, in which it is stated that in a case where an assessee has appeared in any proceedings or co - operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of the said Act which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of the said Act. Perusal of the order of the ITAT reveals that this aspect was not canvassed before the ITAT.

Apart from that. it is an admitted position that no notice under Section 143(2) had been issued while making assessment under Section 143(3) read with Section 147. The Apex Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 1TR 383 has held that the Tribunal has discretion to allow or not to allow a new ground to be raised. But in a case where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. The ITAT, after relying on the judgment of the Apex Court in R. Dalmia v. CIT [1999] 236 TTR 480/102 Taxman702. came to the conclusion that issuance of notice under Section 143(2) was mandatory. The ITAT has taken into consideration the relevant provisions and has also taken into consideration the judgment of the Apex Court and relying on the said judgments, the ITAT has held that notice under Section 143(2) is mandatory and in the absence of such service, the Assessing Officer cannot proceed to make an inquiry on the return filed in compliance with the notice issued under Section148."

2 The Hon'ble Delhi High Court in the case of Pr.CIT v. Silver Line [2016] 383 ITR 455 (Del.) (HC)held that the failure of the Assessing Officer in re-assessment proceedings to issue notice u/s. 143(2) of the Act prior to finalization of the re-assessment order cannot be condoned by referring to section 292BB of the Act and consequently,

3 In the case of Pr.CIT v. Oberoi Hotels Pvt. Ltd., 96 taxmann.com 104 (Cal), the Hon'ble Calcutta High Court held that when the Assessing Officer completed the assessment u/s. 143(3) r.w.s. 147 of the Act without issuing any notice u/s. 143(2) of the Act, re- assessment order passed was legally unsustainable and the same could not be justified by invoking the provisions of section 292BB of the Act. Similar view has been taken by the Mumbai Bench of the Tribunal in the P a g e | 10 A.Y. 2017-18 case of M/s. KanchanjungaImplexPvt. 6057/Mum/2013 dated 23.09.2015 and Shri Asgar Mohammed Hussain GhadialiITA NO. 1879/MUM/2017 (A. Y: 2009-10).We further find that the Hon'ble Bombay High Court in the case of CIT v. Ms. Malvika Arun Somaiya [2 taxmann.com 144] held as under: -

We have heard the learned Counsel appearing for the parties.

While challenging the order of the Tribunal dated 27-9-2007, it is contended that the Assessee having not filed any fresh returns in response to the notice under section 148 of the Income Tax Act, the Tribunal erred in holding that notice under section 143(3)(2) ought to have been served upon the assessee before taking any further proceedings and on this basis question of law raised is that the Tribunal has erred in interpreting section 143(3) of the Income Tax Act and has incorrectly come to the conclusion that the order of assessment was in violation of the statutory provisions.

In our view, the findings recorded by the Tribunal do not call for any interference in face of the judgment of this Court in the case of CWT v. HUF of H.H. Late J. M. Scindia [2008] 174 Taxman 1 and the judgment of the Rajasthan Court in the case of Tiwari Kanhaiya Lal v. CIT [1985] 154 ITR 109. No question of law much less substantial question of law arises for determination. Appeal dismissed. No order as to costs."

4 As could be seen from the above, the facts in this case are that the assessee did not file fresh return of income in response to notice u/s. 148 of the Act and the assessment was completed without issuing notice u/s.143(2) of the Act. In view of the above discussion and the judicial precedents, we hold that in the absence of issue and service of notice u/s. 143(2) of the Act, the re-assessment made by the Assessing Officer u/s. 143(3) r.w.s. 147 of the Act is void ab-initio and is a nullity. Thus, the reassessment order is quashed allowing the ground above.

As we have allowed the appeal of the assessee on the validity of reassessment, we are not inclined to go into the other legal grounds and also the merits of the additions made in the re-assessment as they became only academic and hence, not adjudicated.

In the result, the appeal of the assessee is allowed.