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Facts
The assessee filed an income return, which was later revised. The AO reopened the assessment based on information about accommodation entries. The AO issued a notice to a third-party for verification and, upon receiving no plausible reply, completed the assessment under Section 144 read with Section 147.
Held
The Tribunal held that the assessment order under Section 144 read with Section 147 was bad in law as the assessee was not given an opportunity of being heard, which is a mandatory requirement under Section 144 of the Act.
Key Issues
Whether the assessment order passed under Section 144 read with Section 147 was valid without providing the assessee with an opportunity of being heard.
Sections Cited
144, 147, 143(3), 142, 139, 133(6)
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
Assessee by : Shri Milind Sahasrabudhe, A/R Revenue by : Shri Govindrao J. Ninawe, Sr. D/R सुनवाई की तारीख/Date of Hearing : 06/05/2025 घोषणा की तारीख /Date of Pronouncement: 13/05/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: C.O. No. 64/Mum/2025, are appeal by the revenue and cross-objection by the assessee preferred against the order of the ld. CIT(A)/Addl./JCIT (A) - 5 Kolkata [hereinafter ‘the ld. CIT(A)’], dated 21/11/2024 pertaining to AY 2009-10. C.O. No. 64/Mum/2025 2 1.1. There is a delay in filing of the cross-objection. The delay is condoned.
The grievance of the revenue reads as under:- “Ground No. 1 "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in holding that order passed u/s 144 of the Act is bad in law, despite the fact that the Assessing officer mentioned satisfaction that assessee had not complied to the notice u/s 142(1) of the Act dated 19.08.2014." Ground No. 2 "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in not adjudicating on the addition of Rs.7,28,480/- on merits" Ground No. 3 "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in deleting the penalty of Rs. 7,28,480/- without appreciating the fact that the addition was made on account of bogus purchases based on findings of the sales tax department of Govt. of Maharashtra?" Ground No. 4 "The appellant craves the leave to add, amend, alter and/or delete any of the grounds of appeal as above. Further monetary limit in filing appeal would not apply in the case as per clause 3.1(h) of CBDT Circular No.5/2024 dated 15.03.2024.”
Briefly stated, the facts of the case are that the assessee filed its return of income electronically on 30/09/2009 declaring income of Rs. 17,97,29,762/-. The return was subsequently revised declaring total income at Rs. 1,79,29,762/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. Assessment u/s 143(3) of the Act was framed vide order dated 09/12/2011 assessing total income at Rs. 1,80,69,450/-.
On the basis of the information received to the effect that the assessee is a beneficiary of the accommodation entries to the tune of Rs. 6,93,526/- from hawala dealers. The completed assessment was C.O. No. 64/Mum/2025 3 reopened by issue of notice u/s 148 of the Act. The reasons given for the reopening of the assessment read as under:- “The assessee electronically filed its original return of Income for A.Y.2009-10 on 30/09/2009 declaring total income at Rs. 17,97,29,762/- Subsequently. the assessee electronically filed its revised return of income on 05/02/2010 declaring total income at Rs. 1.79,29,762/-The return of income was processed under section 143(1) of the Act on 15/02/2011. Thereafter, the case was selected under scrutiny and assessment was completed us 143(3) of the Act on 09/12/2011 determining total incline at Rs. 1,80,69,450/-.” 5. In response to the notice u/s 148 of the Act, the assessee stated that the revised return filed on 05/02/2010 be treated as return filed in response to notice u/s 148 of the Act. 6. During the course of the re-assessment proceedings, the AO sought clarification from the assessee in respect of purchase of Rs. 6,93,526/- from Rekha Trading Co.. The assessee was asked to file necessary supporting evidence in respect of the alleged bogus purchases. In order to verify the genuineness of the impugned purchases, notice u/s 133(6) of the Act was issued to Rekha Trading Co., asking it to furnish requisite details relating to the said sales made by it to the assessee. On receiving no plausible reply, the AO completed the assessment u/s 144 r.w.s. 147 of the Act at Rs. 1,87,97,930/-. 6.1. The assessee challenged the assessment before the ld. CIT(A) and vehemently contended that the impugned assessment order framed u/s 144 r.w.s. 147 of the Act is bad in law. 7. After considering the facts and the submissions and referring to the provisions of Section 144 of the Act, the ld. CIT(A) was of the opinion that the circumstances when an assessment can be framed u/s C.O. No. 64/Mum/2025 4 144 of the Act, has not been complied and, therefore, the impugned assessment order deserves to be quashed and accordingly, allowed the appeal of the assessee.
Before us, the ld. D/R reiterated what has been stated in the assessment order. The ld. Counsel for the assessee relied upon the decision of the ld. CIT(A).
We have given a thoughtful consideration to the order of the authorities below. The provisions of Section 144 of the Act read as under:- Best judgment assessment. 144. [(1)] If any person— (a) fails to make the return required [under sub-section (1) of section 139] and has not made a return or a revised return under sub-section (4) or sub- section (5) [or an updated return under sub-section (8A)] of that section, or (b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142 [or fails to comply with a direction issued under sub-section (2A) of that section], or (c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the [Assessing] Officer, after taking into account all relevant material which the [Assessing] Officer has gathered, [shall, after giving the assessee an opportunity of being heard, make the assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assessee [***] on the basis of such assessment : [Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment : Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section.]