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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI R.K. PANDA
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER Assessment Year: 2011-12 Indian Clothing League (P) Ltd., Vs. ITO, Rupinder Kumar Aggarwal, Ward-26(2), Advocate, B-1A/22H, New Delhi. Sector-51, Noida. PAN: AACCV3439R (Appellant) (Respondent) Assessee by : Shri Lalit Mohan, CA Revenue by : Shri Om Parkash, Sr. DR Date of Hearing : 01.02.2022 Date of Pronouncement : 21.02.2022 ORDER This appeal filed by the assessee is directed against the order dated 2nd December, 2019 of the CIT(A)-36, New Delhi, relating to Assessment Year 2011-12.
Facts of the case, in brief, are that the assessee is a company and filed its return of income on 30th September, 2011 declaring the total income at Rs.21,14,660/-. Subsequently, the AO reopened the case of the assessee u/s 147 of the Act by recording the following reasons:-
The assessee, vide letter dated 26.11.2018 stated that the assessee has already filed the return and enclosed the copy of the same. The relevant portion of the letter addressed to the AO reads as under:-
The AO, thereafter, issued notice u/s 142(1) of the Act. Rejecting the various explanations given by the assessee and observing that the assessee has accepted accommodation entry of Rs.25 lakhs, the AO made addition of the same to the total income of the assessee.
5. Before the CIT(A), the assessee, apart from challenging the addition on merit, challenged the validity of the reassessment and also challenged the assessment in absence of issue of notice u/s 143(2) of the Act. However, the ld.CIT(A) was not satisfied with the arguments advanced by the assessee before her and upheld the validity of the reassessment proceedings as well as the validity of the assessment in absence of issue of notice u/s 143(2) of the Act. She also upheld the action of the AO in making the addition of Rs.25 lakhs on merit.
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- “
1. That the learned Commissioner of Income Tax (Appeals)-36, New Delhi has erred both in law and on facts in upholding determination of income of the appellant at Rs. 46,14,660/- as against declared income of Rs. 21,14,660/- in an order of assessment dated 30.12.2018 under section 143(3)/147 of the Act.
2. That since no notice under section 143(2) of the Act was issued and served on the appellant subsequent to filing of return in response to notice under section 148 of the Act and prior to framing an order of assessment under section 147/143(3) of the Act, order of assessment so framed is without jurisdiction and deserves to be quashed as such. 2.1. That since the learned Assessing Officer had admitted in the remand report that no notice under section 143(2) was issued prior to framing of impugned order of assessment, the learned Commissioner of Income Tax (Appeals) ought to have quashed the impugned order of assessment and held the same to be without jurisdiction. 2.2. That the finding that “issuance of notice under section 143(2) of the Act was not needed as the return was not filed by the assessee” is legally misconceived, functionally erroneous and therefore, untenable. 2.3 That furthermore, even the observation that “assessee company was in possession of different PANs and the department was not informed of the existence of duplicate PAN” is an irrelevant and extraneous consideration and had no nexus or basis so as to not to quash impugned order of assessment in absence of notice under section 143(2) of the Act. 2.4 That even the conclusion that in light of the multiple PAN with the appellant and change in the name of assessee company, IT Department did not issue notice u/s 143(2) of the Act is based on misconception of facts and law and in any case, could not have been made a basis to uphold the illegal assumption of jurisdiction to frame the impugned order of assessment under section 147/143(3) of the Act.
3. That the learned Commissioner of Income Tax (Appeals) has otherwise too erred both in law and on facts in upholding the initiation of proceedings u/s 147 of the Act and assessment framed u/s 147/143(3) of the Act which were both without jurisdiction and deserves to be quashed as such. 3.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that statutory precondition for invoking the provisions contained in section 147 of the Act of the Act were not satisfied and therefore both the notice issued and assessment framed are illegal, invalid and void-ab-initio. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the edifice adopted for recording the reasons recorded u/s 148 of the Act was not existence and factually incorrect and thus in absence of any valid reasons to believe that the initiation of proceedings was misconceived, misplaced, and unsustainable. 3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was no specific relevant, reliable and tangible material on record to form a “reason to believe” that income of the appellant had escaped assessment and in view thereof the proceedings initiated are illegal, untenable and therefore unsustainable. 3.4 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that even otherwise there was no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment and as such action u/s 147 was in excess of jurisdiction; 3.5 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that reasons recorded mechanically without application of mind do not constitute valid reasons to believe for assumption of jurisdiction u/s 147 of the Act.
4. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding an addition of Rs.25,00,000/- representing the alleged unexplained cash credit under section 68 of the Act. 4.1 That the authorities below have erred in confirming the aforesaid addition under section 69A of the Act, despite the fact that no such sum was credited in any bank account owned or operated and maintained by the appellant company. 4.2 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the addition of Rs. 25,00,000/- u/s 68 of the Act without any opportunity though the learned Assessing officer had made the addition u/s 69A of the Act and that too on an illegal and invalid basis. 4.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that since assessee had discharged the onus which lays upon it regarding identity of the creditor, creditworthiness of the creditor and genuineness of transactions, sums so received could not be regarded as income from undisclosed sources under section 68 of the Act. 4.4 That since the amount in issue has neither come to any bank account owned by the assessee nor in any books of account of the appellant, the conclusion that appellant has not discharged the burden is fundamentally misconceived, misplaced and untenable. 4.5 That furthermore the learned Commissioner of Income Tax (Appeals) has proceeded to confirm the addition on mere speculation, generalized statements, theoretical assumptions and allegations and assertions, without there being any supporting evidence and is therefore not in accordance with law. 4.6 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that addition made under section 69A of the Act could not otherwise in law be upheld particularly without any notice under section 68 of the Act.
4.7 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that the books of account in respect of which alleged sum of Rs. 25,00,000/-was credited did not belong to the appellant. 4.8 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that since appellant had no knowledge of the books of accounts or bank accounts in respect of which purported sum of Rs. 25,00,000/- was credited, no adverse inference could be drawn validly against the appellant company. 4.9 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that appellant never had any bank account with State Bank of India is factually incorrect basis could not confer valid jurisdiction u/s 147/143(3) of the Act. 4.10 That the learned Commissioner of Income Tax (Appeals) has also overlooked the affidavit filed by the appellant and thus even otherwise vitiated. 4.11 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that remand report was uploaded on the website but no opportunity was given to the appellant to furnish the rejoinder submission and thus the violation of principle of natural justice and therefore the addition made on this ground to vitiated.
That both the authorities below have framed the impugned order without granting fair and meaningful opportunity and, as such, the same is contrary to principles of natural justice, apart from being without jurisdiction.
6. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest u/s 234B of the Act, u/s 234B of the Act, u/s 234C of the Act and u/s 234B of the Act which are not leviable on the facts and circumstances of the case of the appellant company. Prayer: It is therefore, prayed that, it be held that assessment made by the learned Assessing Officer and sustained by the learned Commissioner of Income Tax (Appeals) deserves to be quashed as such. It be further held that addition made and sustained by the learned Commissioner of Income Tax (Appeals) along with interest levied be deleted and appeal of the appellant company be allowed.
The ld. Counsel for the assessee, at the outset, submitted that no notice u/s 143(2) was issued by the AO and, therefore, even in case of a reassessment proceedings in absence of issue of notice u/s 143(2), such assessment order is a nullity. Relying on the following decisions, he submitted that since no notice u/s 143(2) of the Act was issued and served on the assessee subsequent to filing of the return in response to notice u/s 148 of the Act and prior to framing the order of assessment u/s 147/143(3) of the Act, order of assessment so framed is without jurisdiction and deserves to be quashed as such:- i) ACIT v. Hotel blue Moon 321 ITR 362 (SC); ii) CIT v. Laxman Das Khandelwal 417 ITR 325 (SC); iii) PCIT v. Shri Jai Shiv Shankar Traders (P) Ltd 383 ITR 448 (Del); iv) Pr. CIT v. Silver Line and Anr 383 ITR 455 (Del); v) PCIT v. Paramount Biotech Industries Ltd. 398 ITR 701 (Del) ; and vi) CIT v. Delhi Kalyan Samiti (Del) dated 22.3.2016
Referring to the order of the CIT(A) at para 4.2.2., he submitted that the ld.CIT(A) has given a finding that issuance of notice u/s 143(2) was not needed as the return was not filed by the assessee. He submitted that the assessee has filed the return of income is verifiable from the assessment order itself, where the AO has made addition of Rs.25 lakhs to the total income declared by the assessee. As per ITR, at present name of the assessee company i.e., M/s Indian Clothing Leage (P) Ltd., wherein the assessee has declared income at 10 Rs.21,14,660/-. So far as the observation of the CIT(A) that the assessee company was in possession of different PANs and the Department was not informed of the existence of duplicate PAN, he submitted that this is irrelevant and extraneous consideration and had no nexus or basis so as to not to quash impugned order of assessment in absence of notice under section 143(2) of the Act. For the above proposition, he relied on the following decisions:- i) Ardent Steel Ltd. v. ACIT 405 ITR 422 (Chattisgarh); ii) Pr. CIT v. Atlanta Capital (P) Ltd. 119 Taxmann.com 292 (Del), affirmed by the judgment of Apex Court in the case of Pr. CIT v. Atlantal Capital (P) Ltd. reported in 274 Taxman 224 (SC); and iii) CIT v. Eshaan Holding (P) Ltd. 344 ITR 541 (Del)
The ld. Counsel for the assessee accordingly submitted that since no notice u/s 143(2) was issued, the entire assessment proceedings become a nullity.
The ld. DR, on the other hand, heavily relied on the order of the CIT(A).
11. I have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. Before going into the merit of the case, it is pertinent to decide the validity of the assessment in absence of notice u/s 143(2) of the IT Act. A perusal of the order of the CIT(A) shows that the ld.CIT(A) at para 4.2.2 of her order has given the 143(2) of the Act:- “ 4.2.2. From the above, it is seen that when the assessee company was in possession of different PANs, the department was not informed of the existence of duplicate PANs. The affidavit submitted by the director also confirmed the change in the name of the assessee company. Also, the AO had initiated penalty u/s 272B for not surrendering the previous PANs. Therefore, the issuance of notice u/s 143(2) was not needed as the return was not filed by the assessee. The case law cited by the appellant applies only to cases where the return was filed by the assessee. Information was received in the case of M/s Rajdhani Mercantile Pvt. Ltd. / M/s Vibgy or Business Ventures Pvt. Ltd. In light of multiple PANs with the appellant and the change in the name of the company, the ITBA did not generate any notice u/s 143(2). Therefore, the ground of appeal is dismissed.”
I find, the Hon’ble Delhi High Court in the case of PCIT vs. Shri Jai Shiv Shankar Traders (P) Ltd., reported in 383 ITR 448, has held that the failure of the AO to issue notice under section 143(2) is fatal to order of reassessment and such failures cannot be condoned by referring to section 292BB. I find, the Hon’ble Delhi High Court in the case of PCIT vs. Silver Line, reported in 383 ITR 455, has held that merely because the assessee participated in proceedings pursuant to notice u/s 148, it would not obviate mandatory requirement of AO to issue assessee a notice under section 143(2) before finalizing order of assessment. I find, the Hon’ble Delhi High Court in the case of PCIT vs. Paramount Biotech Industries Ltd., reported in 398 ITR 701, has held that unless section 143(2) notice is issued leading to an assessment, the reassessment order passed by the AO for concerned years would be without jurisdiction. Similar view has been held in various other decisions relied on by the ld. Counsel for the assessee to the 143(2) of the Act subsequent to filing of the return in response to notice u/s 148 and prior to framing an order of assessment u/s 147/143(3) of the Act, order of assessment so framed is without jurisdiction and has to be quashed as such.
So far as the observation of the CIT(A) that the assessee company was in possession of different PANs and the Department was not informed of the existence of duplicate PAN is concerned, the same, in my opinion is irrelevant and extraneous consideration.
13.1 I find, the Hon’ble Chhattisgarh High Court in the case of Ardent Steel ltd. Vs. ACIT, reported in 405 ITR 422 has held that where reassessment notice u/s 148(1) was issued against assessee after expiry of period of limitation at old address of assessee which was already changed by assessee before the date of issuance of said reassessment notice in official record by updating PAN data base, it could be said that there was no service of reassessment notice upon assessee.
I find, the Hon’ble Delhi High Court in the case of PCIT vs. Atlanta Capital (P) Ltd., reported in 119 taxmann.com 292, has upheld the order of the Tribunal quashing the reassessment proceedings in absence of notice u/s 148 was not issued at the last known address of the assessee. The above order of the Hon’ble Delhi High Court was upheld by the Hon’ble Supreme Court and the SLP filed by the Revenue was dismissed as reported in 274 Taxmann 224. I find some what identical issue had come up before the Hon’ble Delhi High Court in the case of CIT vs. Delhi Kalyan Samiti, vide ITA 696/2015,Order dated 22nd March, 2016 and batch of other appeals where the Hon’ble High Court has observed as under:- “7. We have heard the learned counsel for the parties. 8. At the outset, we are unable to accept Mr Shivpuri‟s contention that even in cases where valid returns have been filed the AO could proceed to frame an assessment under Section 144 of the Act without issuance of any notice under Section 143(2) of the Act. 9. It is now well established that if the AO does not accept the return filed by the Assessee on its face and he is required to issue a notice under Section 143(2) of the Act and provide an opportunity to the Assessee to produce the necessary material in support of his return. Mr Shivpuri had argued that a notice under Section 143(2) was required to be issued only in cases where the AO considers it necessary or expedient to do so and in cases where the Assessee had not filed its response to the notice under Section 142(1) it was not necessary for the AO to issue such notice under Section 143(2). In our view, this contention is bereft of any merits and completely ignores the scheme of the machinery provisions for assessment under the Act. It is now well settled by a number of decisions (See: Pr. CIT v. Silver Line and Anr.: 283 CTR 148 (Del), ACIT v. Hotel Blue Moon: 321 ITR 362 (SC) and CIT v. Pawan Gupta: 318 ITR 322 (Del)) that whenever the return filed by an Assessee is not accepted at its face, it is mandatory for the AO has to issue a notice under Section 143(2) of the Act for proceeding further. It is thus not open for the AO to not issue a notice under Section 143(2) of the Act and proceed directly under Section 144 of the Act by rejecting the return filed by the Assessee. 10. The decision of this Court in Ashok Chaddha (supra) was rendered in the context of Section 153A of the Act and in our view, the same is not applicable in the present case. This Court in several cases pertaining to proceedings under Section 147 has held that a notice under Section 143(2) is mandatory. [See: Alpine Electronics Asia (P.) Ltd. v. DGIT: 341 ITR 247 (Del), DIT v. Society for Worldwide Interbank Financial Telecommunication: 323 ITR 249 (Del), Pr. CIT v Shri Jai Shiv Shankar Traders Pvt. Ltd.: 282 CTR 435 (Del) and CIT v. Rajeev Verma: 336 ITR (All)]. It is also relevant to note that clause (b) of the proviso to Section 148(1) of the Act also specifically extends the period for issuance of notice under Section 143(2) of the Act.
Mr Jain’s contention that a belated return filed by the Assessee prior to the assessment cannot be ignored as an invalid return, prima facie, appears to be merited. However, in the facts of the present case, the said question does not arise as the AO had issued a notice under Section 142(1) of the Act on 30th November, 2011, inter alia, calling upon the Assessee to file its return. Further, on 10th December 2007, the AO was informed that the Assessee was in the process of filing its return and an adjournment was requested. The AO had acceded to his request, which would be wholly unnecessary if the AO was of the view that a belated return would be invalid. Thus, in the facts of the present case, the returns filed by the Assessee could not be ignored by the AO.
12. We find no infirmity with the impugned order passed by the ITAT. No substantial question of law arises in the present appeals. The same are, accordingly, dismissed. However, in the circumstances, the parties are left to bear their own costs.”
Since, in the instant case, the assessee has filed the return of income and has duly intimated to the AO vide letter dated 26.11.2018, the contents of which has already been reproduced in the preceding paragraph and since the AO has not issued any notice u/s 143(2) before completion of the reassessment, therefore, respectfully following the decisions cited above, I am of the considered opinion that the assessment order passed without issuing the notice u/s 143(2) is not in accordance with law and is without jurisdiction and, therefore, has to be quashed. I, therefore, quash the reassessment proceedings . Since the assessee succeeds on this legal ground, the other grounds raised by the assessee being academic in nature, are not being adjudicated.
In the result, the appeal filed by the assessee is allowed. 15 The decision was pronounced in the open court on 21.02.2022.