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Income Tax Appellate Tribunal, RAJKOT
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
PER RAJPAL YADAV, JUDICIAL MEMBER: Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-11, Ahmedabad dated 28.9.2016 passed for the Asstt.Year 2010- 11.
Sole grievance of the Revenue is that the ld.CIT(A) has erred in holding that entire assessment order is void ab inito because it was passed without issuance of mandatory notice under section 143(2) of the Income Tax Act, 1961.
Brief facts of the case are that notice under section 148 was issued on 10.12.2014. Assessment of the assessee was reopened. In response to this notice, the assessee wrote a letter on 22.6.2015 contending therein that
ITA No.448/RJT/2016 2 original return filed on 7.10.2010 showing total income at Rs.4,40,900/- may be treated as return filed in response to notice under section148. The AO has passed a reassessment order on 16.2.2016 under section 143(3) r.w.s. 147 of the Act. In the assessment order, the ld.AO has mentioned that notice under section 143(2) was also issued on 22.6.2015. However, when the assessee challenged this order in appeal before the ld.CIT(A) it has contended that no such notice was issued by the AO. The AO has made huge addition of Rs.5.21 crores on account of bogus share application money. But, the ld.CIT(A) has quashed the assessment order on preliminary grounds viz. the AO has not issued notice under section 143(2) after submissions of the return in response to the notice under section 148 of the Act. The ld.CIT(A) has recorded this finding after calling for a remand report. The finding recorded by the ld.CIT(A) in this connection reads as under:
“5. The first and second grounds of appeal were related to the validity of the assessment order u/s 143(3) r.w.s.147. The AR of the appellant submitted that in response to notice dated 10.12.2014 u/s 148 the appellant through letter dated 18.12.2014 requested the AO to treat the original return as return in compliance to notice u/s 148. In view of these facts, the AO was required to issue and serve notice u/s 143(2) on or before 30.9.2015. However, the AO failed to issue and serve the statutory notice u/s 143(2) and completed the re-assessment proceedings. As a matter of f act, the appellant also objected to the re- assessment on the ground of non-issuance and service of notice u/s 143(2) before the AO vide his reply dated 5.2.2016 in response to the show cause notice. He filed copy of the letter at page No.15 of the paper book. It was contended that the AO completely bypassed the vital contentions of the appellant while passing the assessment order. The finding of the AO in para 1 of the assessment order that notice u/s 143(2) was also issued on 22.6.2015 was factually not correct. In order to confirm this fact the AR of the appellant requested the AO through his letter dated 15.7.2016 to provide copy of the notice issued u/s 143(2) alongwith proof of its service as it was relevant document for appeal proceedings. However, till date the appellant did not receive any communication from the AO. Issuance and service of notice u/s
ITA No.448/RJT/2016 3 143(2) is a mandatory condition which is explicitly clear from the provisions of section 148 w.e.f. 1.10.2005.
5.1 The appellant enclosed copy of the referred letter at page No.20 of the paper book. Therefore, it was abundantly clear that the reassessment completed without issuing and servicing any notice u/s 143(2) of the resulted into the reassessment as invalid one. He contended that the legal position on the issue had attained finality by the Hon'ble Apex Court in the case of Hotel Blue Moon-321 ITR 362. He also relied upon the following decisions :-
Panorama Builders Pvt Ltd (Guj)-Tax appeal No.435 of 2011 Mahi Valley Hotels & Resorts -287 ITR 360 (Guj) Shri Jai Shiv Shankar Traders (P) Ltd 2015 64 Taxman.com 220 (Delhi) Aligarh Auto Centre (Agra ITAT) (2013) 83 DTR 418 (Agra Trib) Sukhini P. Modi 367 ITR 682 (Guj) Nilesh Rameshwarprasad Gupta Tax appeal No.471 (2011) dated 13.6.2012 (Guj) Gitsons Engineering Co 370 ITR 87 (Madras)
5.2 He further mentioned that the assessee raised a specific objection in this regard before completion of the assessment proceedings, therefore, even section 292 BB cannot save the situation in the case of the appellant which reads as under:-
"Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment."
The ClT(A), Rajkot have taken the same view wherein the re- assessments were annulled in absence of issuance and service of notice u/s 143(2) i.e. CIT(A)-3, Rajkot in the case of Shantilal V Haria and CIT(A)-1, Rajkot in the case of Hetal Kumar H.Tanna.
5.3 The facts of the case, contents of the assessment order and submissions of the appellant have been considered. In view of the finding of the AO that notice u/s 143(2) was issued on 22.6.2015 and the rebuttal thereof by the assessee during assessment proceedings, it was considered necessary to ascertain correct position of the facts on
ITA No.448/RJT/2016 4 the issue. Therefore, the A0-was requested to submit his remand report after factual verification f the case records.
The ACIT Central Circle-1; Rajkot in his report dated 30.8.2016, which was submitted through the office of the CIT, Central, Ahmedabad submitted that
At the very outset, it is submitted that case of the assessee was reopened by issuance of notice u/s.148 dated 10.12.2014. Assessee filed return of income showing total income of Rs.4,40,900/, Assessment u/s 143(3) r.w.s. 147 of the Act was finalized on 16.2. 2016 by making addition of Rs. 5,21,04,000/- on account of unexplained share capita/ & commission and total income was determined at Rs. 5,25,44,900/, In the assessment order mentioned that a notice u/s 143(2) was a/so issued on 22.6.2015.
However, on scrutiny and verification of the assessment folder for the A.Y. 2010-11, no notice u/s 143(2) of the Act has been found on record. Further, on verification of entry of outward register on 22.6.2015, no entry of notice u/s 143(2) has been found. We also verified the entry of outward register for the month of June. 2016, out no entry of notice u/s 143(2) has been found In view of the facts stated above, it appears that no notice u/s 143(2) of the Act has been issued or served in this case."
It seems from the contents of the report that notice u/s 143(2) was not issued and served upon the assesses within the prescribed time.
The facts of the case of Sukhini P.Modi, in brief, are that the assessee filed return for the.A.Y1996-97 which was processed u/s. 143(1). The assessment was completed u/s.143(3) r.w.s. 147. The The assessee preferred the appeal before the CIT(A) on the ground that notice u/s.143(2) was not issued and the only notice served upon him was u/s 142(1) of the Act. Following the decision of the Apex Court in the case of R. Dalmia (supra) and oh detailed examination of the issue, the Commissioner Appeal concluded that the assessment framed was not sustainable. In the case of R. Dalmia (supra) the Apex Court concluded that the AO has to necessarily follow the provisions of section 142(1) and sub-section (2) and (3) of section 143 and rejected the
ITA No.448/RJT/2016 5 submissions of the Revenue that the requirement of the notice u/s 143 (2) can be dispensed with and the same is mere procedural irregularity.
7.1 The Gujarat High Court while deciding the case of Sukhini P Modi referred to the cases of Mahi Valley Hotels & Resorts (supra) and Hotel Blue Moon (supra) and gave its finding that the CIT(Appeals) and the Tribunal held that the procedure prescribed of issuance of notice u/s 143(2) was not followed at all. This realm of the fact was not disputed by the Revenue. Therefore, assumption of jurisdiction of issuance of notice of reopening itself would not be sustainable. In the absence of fulfillment of mandatory requirement of issuance of notice u/s 143(2) both the authorities rightly and validly held against the Revenue and in favour of the assessee. Thus, the appeal of the Revenue was dismissed.
The facts of the case under consideration are similar to the facts of the case of the above decision. Therefore, the ratio of judgment of the jurisdictional High Court is squarely applicable to the facts of the case of the appellant. There was nothing on the record of the AO to rebut the objection raised by the assessee regarding the legality of the assessment proceedings. The assessee made specific objections, at the very initial stage of the proceedings before the AO, that the entire assessment proceedings were illegal as no notice u/s 143(2) was issued and served upon him within the prescribed time. The Remand Report of the AO on the issue also --confirmed this fact.
8.1 It was a fact on record that the AO did not issue and serve mandatory notice u/s 143(2) in the case of the assessee before proceeding to complete the reassessment u/s 148 of the Act. Therefore, after having regard to the facts and circumstances of the case and position of law on the issue, in my considered opinion, the order passed u/s.147 was without any jurisdiction. Accordingly, the grounds of appeal are allowed.
The remaining grounds of appeal are not required to be adjudicated on merit as the entire assessment order has been held as void-ab-inito and bad in law.
ITA No.448/RJT/2016 6 4. With the assistance of the ld.representatives, we have gone through the record carefully. In the above impugned order, the ld.CIT(A) has reproduced the remand report submitted by the ACIT, Cir.1, Rajkot on 30.8.2010. A perusal of this remand report would indicate that the ld.AO has admitted non- issuance of notice under section 143(2). Thus, the mandatory notice was not issued and served upon the assessee. The ld.First Appellate Authority after putting reliance upon various judgments has rightly quashed the assessment order, because it has been passed in violation of mandatory provisions. In view of the above, the appeal of the Revenue is dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the Court on 8th April, 2019 at Ahmedabad.
Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 08/04/2019