DEEPAKKUMAR RAMANLAL THAKKAR,SURAT vs. ITO WARD-1(3)(1), SURAT

On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in making addition of Rs. 13,67,398/- on account of credits from unexplained sources.

It is therefore prayed that the assessment please may be quashed and/or addition made by the assessing officer and confirmed by CIT(A) may please be deleted.

Appellant craves leave to add, alter or delete any of the ground(s) before or in the course of hearing of the appeal.” The assessee has raised the following additional ground of appeal: “The Ld. Assessing Officer has erred in not issuing fresh notice u/s. 143(2) after the assessee filed the return of income on 29.11.2018 revising the return of income filed on 07.06.2018 in response to notice u/s. 148 issued on 30.03.2018.” 3. The assessee did not file return of income for A.Y. 2014-15 u/s 139 of the Act. Assessment proceedings u/s 147 of the Income Tax Act, 1961 (in short “the Act”) was initiated for A.Y. 2014-15 by issuing notice u/s 148 of the Act on 30.03.2018 after taking approval from competent authorities. In response to notice u/s 148, the assessee furnished reply dt. 9.6.2018 as well as filed return of income on 7.6.2018 thereby declaring income at Rs.620/-. Thereafter, copy of reasons recorded were provided to assessee. On 11.09.2018, notice u/s 143(2) was issued to assessee. Thereafter, notice u/s 142(1) alongwith questionnaire were issued on 25.09.2018. No details were filed by assessee. Notice u/s 142(1) was again issued on 16.10.2018 which was again not replied by Assessee. Summons u/s 131 of the Act was issued to assessee on 20.11.2018 thereby asking assessee to attend office with details on 26.11.2018. But assessee did not respond. The assessee filed revised return of income on 29.11.2018 declaring total income of Rs.4,06,880/- disclosing the income from share of profit from firm, interest & Long Term Capital Gain (LTCG) exempt u/s 10(38) of the Act. The Assessing Officer observed that the assessee claimed to have derived LTCG of Rs. 2,57,43,181/- and claimed amount of Rs. 2,54,43,121 as exempt u/s 10(38) of the Act in return filed in response to notice u/s 148 by the sale of the shares of "Turbotech Engineering Ltd". The said shares were purchased by the assessee through Nirmal Bang Securities Pvt. Ltd. in Nov 2011 & 01.04.2012. The shares were sold in the month of Sep 2013. Thus, assessee gained 848% in around 23 to 24 months of shareholding. The Assessing Officer further observed that there are credits / deposits of Rs.13,67,398/- in assessee's bank account for which assessee has not provided details. Further the Assessing Officer noted that the assessee declared sundry creditors of Rs. 71,439/- in his return of income without any supporting evidence. Thus, the Assessing Officer made addition of Rs. 2,57,43,181/- as unexplained expenditure u/s 68 of the Act and disallowed exemption of Long Term Capital Gain. The Assessing Officer also made addition of Rs.13,67,398/- treating the same as credits from unexplained sources as well as addition of Rs.71,439/- as unexplained and added to total income u/s 41(1) of the Act. The Assessing Officer took total income as Rs.4,06,880/- as per revised return. Thus, the Assessing Officer assessed total income of Rs 2,58,76,060/-.

Being aggrieved by the assessment order, the assessee filed appeal before CIT(A). The CIT(A) dismissed the appeal of the assessee.

The Ld. Authorised Representative (in short “the Ld. AR”) submitted that the assessee filed additional ground that the Assessing Officer has not issued notice u/s 143(2) on the revised return of income filed on 29.11.2018. The assessee filed return of income on 07.06.2018 in response to notice u/s 148 issued on 30.03.2018. The Notice issued u/s 143(2) dated 11.09.2018 was issued in respect of return of income filed on 07.06.2018 and no new notice u/s 143(2) was issued after filing revised return of income which is mandatory. The Ld. AR relied upon the decision of Tribunal in case of LIC Mutual Fund Asset Management Ltd. vs. CIT (ITA No. 2824/Mum/2023 Order dated 26.02.2024). The Ld. AR further submitted that the Assessing Officer did not treat the revised return dated 29.11.2018 as non-est, in fact, while computing assessed income, the Assessing Officer 3 adopted the return of income of Rs. 4,06,880/- which was declared as per revised return filed on 29.11.2018 by the assessee. The Ld. AR further submitted that without prejudice to the precise nomenclature or statutory provision under which the return dated 29.11.2018 is described, the procedural consequence follows from its actual acceptance and use by the Assessing Officer. Section 292BB cannot cure complete absence of the requisite notice with reference to the operative return.

The Ld. Departmental Representative (in short “Ld. DR”) relied upon the assessment order and the order of the CIT(A). The Ld. DR submitted that the Assessee has filed revised return at the fag end of the completion of assessment order. Besides this notice u/s 143(2) was issued on 11.09.2018 and statutory compliance was made by the Assessing Officer. In fact, the assessee was non-co-operative during assessment proceedings. Thus, the Ld. DR submitted that the additional ground be dismissed.

We have heard both the parties and perused all the relevant material available on record. As per the proviso to Section 143(2) no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. In present assessee's case the revised return was furnished on 29.11.2018 and the Assessing Officer was having one month time before concluding the assessment proceedings. The assessment order was passed on 05.12.2018. Thus, the Assessing officer cannot ignore the mandatory requirement of issuing notice u/s 143(2) once again after receiving revised return of income dt. 29.11.2018. The decision of Tribunal in case of L&T Mutual Fund Asset Management Ltd. (supra) held as follows: “8. A bare reading of provisions of sub-section (2) to Section 143 would show that the notice u/s. 143(2) the Act is with reference to the return furnished u/s. 139 of the Act. In the instant case the Assessing Officer had issued notice u/s. 143(2) on 05/09/2014 with reference to original return of income filed by the assessee on 19/11/2013. Subsequently, the assessee filed revised return of income on 31/03/2015, which was accepted by the Assessing Officer and the assessment was framed on the revised return of income. Once a valid revised return of income is filed, the original return is deemed to be withdrawn. In other words, a valid revised return of income filed u/s. 4 139(5) of the Act substitutes the original return filed u/s. 139(1) of the Act. Thus, it is considered as assessee's final return of income. The Assessing Officer is under obligation to issue notice u/s. 143(2) of the Act in respect of return of income which he accepts for completing the assessment. As pointed earlier, notice u/s. 143(2) of the Act is specific to the return of income, not the Assessment Year. Therefore, we are of considered view that non-issuance of notice u/s. 143(2) of the Act after the assessee had filed revised return of income is an incurable defect and is fatal to the assessment order passed without the said notice.

The Tribunal in the case of Yes & Yes Hitech Premier Homes vs. ITO (supra) under similar set of facts held the assessment bad in law in the absence of notice u/s. 143(2) of the Act. The relevant extract of the findings of the Tribunal on the issue are as under:

Thus, in facts of the case discussed above and in light of the provisions of section 143(2) r.w.s. 139 of the Act, we hold the impugned assessment order is without jurisdiction in the absence of notice u/s. 143(2) of the Act after revised return of income was filed by the assessee. The question in para-7 above, is thus, answered in affirmative. In the result, ground No.3 of appeal is allowed.” Since in present assessee's case the (revised) return of income filed on 29.11.2018 was taken on record/adopted by the Assessing Officer while computing the assessed income, the return filed on 29.11.2018 was treated as valid income by the Assessing Officer. Thus, the compliance of Notice u/s 143(2) should have been done by the Assessing officer after receiving return of income dated 29.11.2018 filed by the assessee. The decision of Tribunal is apt in present assessee's case as well. Therefore, the assessment itself becomes void ab initio. The additional ground raised by the assessee is allowed. As relates to original, the grounds of the appeal, the same becomes academic and does not require adjudication at this juncture as the assessment itself is invalid. 8. In result, appeal of the assessee is allowed.