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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI KULDIP SINGH
Per : Kuldip Singh, Judicial Member:
The appellant, Legal Heir of Late Shri Satish Indra Sharma (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 15.10.2019 passed by Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as the CIT(A)] qua the assessment year 2009-10 on the grounds inter-alia that :- “A) Ld. Commissioner of Income Tax (A) – 30 erred in not holding the assessment order as bad in law, non-est and void ab initio on the grounds that: i. Notice u/s 148 was issued without obtaining the sanction of the relevant authority,
ii. No satisfaction of the approving authority was produced for issue of notice u/s 148 iii. No notice was issued u/s 143(2) iv. The assessment order u/s 143(2)/147 dt 25.3.2015 was passed without considering the assessee's objections to the said notice v. The assessee's objections were perfunctorily dealt with only on 30.3.2015, i.e after passing the assessment order on 25.3.2015 vi. The Notice of Demand was signed on 19.3.2015, before passing the assessment order on 25.3.2015 B) Without Prejudice, Ld Commissioner of income Tax (A)-30 erred in i. Framing the appellate order on a deceased person, instead of on the legal heirs. ii. Enhancing to 100% the addition of 12.5% of 'bogus purchases' made by the AO. iii. Although all details of purchases and sales were given to the AO iv. Without considering that there cannot be sales without purchases, and the purchases were never doubted v. Without furnishing to the assessee the statements of the parties who allegedly issued accommodation bills to the assessee vi. Without giving the assessee the opportunity of cross examination of those parties at (ii) above vii. Ignoring that all payments were made by cheque, thereby establishing the genuineness of the recipient parties viii. Without ascertaining whether the cheque payments made by the assessee were returned in cash.”
Briefly stated facts necessary for adjudication of the issue at hand are: the assessee is engaged in the business under the proprietary concern M/s. Continental Engineering Enterprises who has filed return of income for the year under consideration on 25.09.2009 declaring total income of Rs.5,93,200/-. On the basis of information received from the Director General of Income Tax (DGIT), Investigation Wing, Mumbai that a scam has been unearthed by Sales Tax Department regarding issue of hawala bills/accommodation entries by several parties in Mumbai and assessee is one of such beneficiaries. Assessee alleged to have availed of benefits of accommodation bills from 30 parties of the total bill amount of Rs.2,08,34,218/-. On the basis of this material Assessing Officer (AO) “recorded reason” to believe that the assessee has taken accommodation entries from 30 parties to the tune of Rs.2,08,34,218/- thus escaped assessment for A.Y. 2009-10 and thereby initiated the reopening of assessment under section 147/148 of the Income Tax Act, 1961 (for short ‘the Act’). Notices along with questionnaire under section 142(1) and 143(2) of the Act were issued and served on the assessee. In order to verify the genuineness of the purchases made by the assessee notices under section 133(6) of the Act were also issued but received back with the remarks by the postal authorities as not known/left. Declining the contentions raised by the assessee the AO proceeded to make an addition of Rs.26,04,277/- being 12.50% of the total bogus purchases of Rs.2,08,34,218/- and thereby AO accordingly framed the assessment under section 143(3) read with section 147 of the Act.
Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has enhanced the addition/income to Rs.2,08,34,218/- being 100% of bogus purchases from Rs.26,04,277/- by dismissing the appeal filed by the assessee. Feeling aggrieved assessee has come up before the Tribunal by way of filing present appeal.
I have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Before proceeding further it is necessary to peruse the reasons recorded by the AO for the purpose of reopening of assessment under section 147 of the Act for ready perusal, which are as under:
At the very outset, the Ld. A.R. for the assessee contended that the entire reopening proceedings initiated by the AO under section 147/148 of the Act are vitiated, non-est as “no notice under section 143(2)” has been issued on 12.12.2014 as recorded in assessment order and relied upon the decision rendered by Hon’ble Bombay High Court in case of CIT vs. Sodder Builder & Developers (P.) Ltd. (2020) 115 taxmann.com 251 (Bombay), decision rendered by Hon’ble Apex Court in case of CIT vs. Laxman Das Khandelwal (2019) 417 ITR 325 (SC) and order passed by the co-ordinate Bench of the Tribunal in case of Sapankumar U Jain vs. ITO (2022) 94 ITR (Trib) 216 (Mumbai).
However, on the other hand, in order to repel the arguments addressed by the Ld. A.R. for the assessee, the Ld. D.R. for the Revenue by relying upon the order passed by the AO and Ld. CIT(A) contended that after recording reasons notice was issued under section 142(1) and 143(2) along with questionnaire and on the basis of objection raised by the assessee to the reopening order was passed by the AO after dismissing the objections.
Undisputedly reopening under section 147/148 of the Act was initiated on the basis of information received from DGIT(Inv.) Wing, Mumbai that assessee has availed of the benefit of bogus bills from 30 parties. It is also not in dispute that in para 6 of the assessment order the AO has specifically recorded the finding that; “In view of change of jurisdiction, the notices u/s. 143(2) and 142(1) were issued on 12th December, 2014 and duly served on the assessee along with intimation letter dated 12th December, 2014 regarding change of jurisdiction.”
In order to support his arguments that no notice under section 143(2) was ever issued by the AO after initiating the reopening of assessment proceedings the Ld. A.R. for the assessee drew my attention towards application moved by the assessee as annexure ‘A’ for obtaining information under the Right to Information Act (RTI Act), 2005 available at page 15 of the paper book-1, which is extracted as under for ready perusal:
Then Ld. A.R. for the assessee drew my attention towards order passed by the Central Public Information Officer (CPIO) under section 7(1) of the Right to Information Act, 2005 available at page 17 of the paper book-1 which is also extracted as under for ready perusal:
Bare perusal of the application moved by the assessee under Right to Information Act, 2005 seeking inter-alia copy of notice alleged to have been issued under section 143(2) dated 12.12.2014, proof of service of notice under section 143(2) etc. Central Public Information Officer vide its order dated 12.07.2019 passed under section 7(1) of the Right to Information Act, 2005 held and intimated to the assessee that “there is no notice under section 143(2) has been issued on 12.12.2014 (as per record)”. When no notice under section 143(2) has ever been issued by the AO the entire reopening proceedings initiated under section 147/148 of the Act are non-est, vitiated and not sustainable in the eyes of law.
Hon’ble Bombay High Court in case of Sodder Builder & Developers (P.) Ltd. (supra) has decided this issue by following the decision rendered by Hon’ble Apex Court in case of Asst. CIT and Anr. Vs. Hotel Blue Moon (2010) 229 CTR (SC) 219 : (2010) 35 DTR 1 (SC) that issuance of notice under section 143(2) of the Act is mandatory requirement and not a mere procedural irregularity which can be said to be curable by returning following findings: "7. The issue relating to service of notice under s. 143(2) of the said Act, is an issue which goes to the root of the matter. The Hon'ble apex Court in the case of Asstt. CIT and Anr. vs. Hotel Blue Moon (2010) 229 CTR (SC) 219 : (2010) 35 DTR 1 (SC) has now held that issuance of notice under s. 143(2) of the said Act is a mandatory requirement and not some mere procedural irregularity which can be said to be curable. In this decision, the apex Court, in clear terms, has held that omission on the part of the assessing authority to issue a notice under s. 143(2) cannot be regarded as a procedural irregularity which is curable. Therefore, the requirement of notice under s. 143(2) cannot be dispensed with."
Hon’ble Apex Court in case of Laxman Das Khandelwal has also decided the validity of the assessment in the absence of notice under section 143(2) of the Act by returning following findings: "Assessment—Validity—Absence of notice under s. 143(2}—Notice under s. 143(2) is mandatory for the purpose of making the assessment under s. 143(3)—Sec. 292BB does not save complete absence of notice—For s. 292BB to apply, the notice must have emanated from the Department—It is only the infirmities in the manner of service of notice that the section seeks to cure—Since in the instant case no notice under s.143(2) was ever issued by the Department the assessment has been rightly quashed" 14. Co-ordinate Bench of the Tribunal in case of Sapankumar U Jain (supra) also decided the identical issue in favour of the assessee by following the decision rendered by Hon’ble Supreme Court in case of Laxman Das Khandelwal (supra).
In view of what has been discussed above, I am of the considered view that when it is proved on record that no notice under section 143(2) of the Act has ever been issued by the AO further proceedings initiating the reopening of assessment under section 147/148 of the Act are non-est and the assessment framed by the AO under section 143(3) read with section 147 of the Act is liable to be quashed.
The contention of the Ld. D.R. that issuance of notice under section 143(2) of the Act is a procedural irregularity and as such is curable under section 292BB of the Act but this question has already been decided by the Hon’ble Supreme Court in negative in the case of Laxman Das Khandelwal (supra) by holding that non issuance of notice under section 143(2) of the Act is jurisdictional defect and cannot be cured by section 292BB of the Act.
Since the re-assessment framed under section 143 read with section 147 of the Act on the basis of reopening does not withstand the judicial scrutiny hence quashed, the other ground raised by the assessee for challenging the addition made on account of bogus purchases need not be decided as they have become merely academic.
Resultantly, appeal filed by the assessee is hereby allowed.
Order pronounced in the open court on 30.11.2022.