MANORMA V. RATHI,MUMBAI vs. ACIT 21(1), MUMBAI

Date of Hearing 21.04.2022 Date of Pronouncement 15.07.2022 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the assessee is directed against the order passed by the ld. CIT(A)-32, Mumbai, which in turn arises from the order passed by the A.O u/s 143(3) r.w.s 153C of the Act for A.Y.2006- 07. The assessee has raised the following grounds before us:

2 Smt. Manorma V. Rathi Vs. The ACIT, Circle 21(1)

“01. The orders passed by the learned lower authorities are bad in law and bad in facts.

2. The assessment order passed is void ab-initio, inasmuch as, no return of income was prescribed by the rule making authority for the assessment year under appeal. In the absence of a prescribed form of return of income, the assessment mechanism failed and hence no assessment could have been framed u/s.143(3) r.w.s. 153C of the I.T. Act, 1961.

4. The assessment order in question is void ab-initio, inasmuch as, same had become barred by limitation as prescribed u/s.153 of the 1.T. Act, 1961.

6. The appellant may please be permitted to raise any additional or alternative ground on or before the hearing of the appeal.”

Therefore, the A.O has added the amount of Rs.24 lac disclosed by the assessee to the total income of the assessee.

3. The assessee had filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. The further relevant fact of the case are discussed while adjudicating the ground of appeal filed by the assessee. Regarding the claim of the assessee that in the absence of prescribed form of return of income no assessment could have been framed u/s 143 r.w.s 153C of the Act. The relevant part of the order of the CIT(A) is reproduced as under:

“3.3. I have considered the above arguments of the Ld.AR. On the facts of the case, one would fail to understand as to why the appellant is challenging the legality of the assessment order, when the income assessed is same as the income disclosed in revised return by appellant and even the appellant is aware that the taxes paid by her as per return filed by her, cannot be refunded back under any circumstances. The only apparent purpose seems to be, is to escape the rigors of the penalty u/s 271(1)(C), by claiming the assessment to be nullity. Be that as it may, the plea of the appellant is not tenable even as per law. On one hand, the appellant herself claims that the return form for search assessments u/s.153A were notified under Rule 12 of the I.T. Rules w.e.f 14.5.2007 only but still did not file the return in the requisite prescribed form in response to notice u/s 153C which was issued to her on 16.11.2009 which was much after the date when the return forms for 153A & 153C were already notified under I T Rules. Even on 31 12 2008 w en the appellant filed its revised return for AY 2006 07, the returns forms for 153A/C were already notified. Therefore, it was for the assessee to have filed the return the prescribed form in response to notice u/s 153C. Hence the appellant now cannot claim that the assessment made was not based on the correct prescribed form of return. Further upon issue of notice on 16/11/2009F the appellant instead of filing a fresh return in prescribed form, made a request to AO vide letter dated 4.12.2009 that the earlier revised return filed on 31.12.2008 may be treated as the return filed in response to the notice u/s.153C. Therefore, in view of the specific request made by the assessee herself, the said return filed on 31.12.2008 in Form No.2D would have to be deemed to have been filed in response to notice u/s.153C and while deeming so, it is necessarily requires to deem further that the said form is also in the prescribed form as required in respect of the return to be filed in response to notice u/s.153C. Hence the request of appellant to treat the earlier return filed in form 2D to be filed in pursuance to notice u/s 153C cannot be accepted in part, without treating the same return in the prescribed form also which is required to be filed in response to notice u/s 153C. Even otherwise the plea of the appellant that provisions of u/s.139 has been excluded from the applicability is not correct because u/s.153A(1)(a) it is mentioned therein itself that the return has to be filed 4 Smt. Manorma V. Rathi Vs. The ACIT, Circle 21(1) in the prescribed form as if such returns were returned required to be furnished u/s.139. Hence even on this ground the return filed in form 2D which is applicable for returns to be filed u/s 139 would also be applicable for the returns to be filed u/s 153A/C. Moreover, the arguments raised by appellant are in respect of merely a technical or venial irregularity that too committed by the appellant herself and therefore mow the appellant cannot take the benefit of her own mistake in filing the return in a different prescribed form. Even if there is a technical or venial breach, it is taken care by section 292B because the return filed on 31.12.2008 has been stated by the assessee to be considered to be in pursuance of 153C and hence it was in substance and in conformity with the intent and purpose of the notice issued u/s.153C. Hence, the plea of the assessee that assessment is bad in law is rejected.”

It is noticed that similar ground of appeal was filed before the ld. CIT(A) which was dismissed by the ld. CIT(A).

5. The assessee had also raised another technical ground that in her case the A.O had not issued any notice u/s 143(2) of the Act. In this regard the assessee has placed reliance on the decision of ITAT, Chennai in the case of P. Sukumar HUF Vs. ACIT vide to 1737 dated 30.04.2010 and ITAT, Indore in the case of ACIT Vs. G.M. Infrastructure, vide ITA 133/Ind/2008, dated 27.06.2010, ITAT, Agra in the case of Narendra Singh Vs. ITO, Gwalior, vide ITA No. 317(Agra) of 2010, dated 30.11.2010 and the decision of Hon’ble Supreme Court in the case of ACIT Vs. Hotel Blue Moon (2010) 312 ITR 362 (SC). On this issue the assessee has also raised this technical ground before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee and the relevant part of the decision is under:

“4.1. I have considered the arguments of the Ld. AR and also gone through the order of the Hon. Supreme Court in the case of Hotel Blue Moon (Supra). It is noted that the said decision in the case of Hotel Blue Moon was rendered in context of the assessment made u/s.158BC without issue of notice u/s.143(2), whereas in the case of the appellant, the assessment has not been made 6 Smt. Manorma V. Rathi Vs. The ACIT, Circle 21(1) u/s.158BC but u/s.153C. The provisions of 153A/C are differently worded than the provisions of 158BC. The provisions of block assessment u/s 158BC are self contained code as held by the various courts whereas the provisions of section 153A/C are only the enabling provisions to reopen the assessments after a search is initiated and thereafter the assessment has to be made as per the provisions of the Act. The Hon. Supreme Court has rendered the decisions in case of Hotel blue moon(supra) by considering the specific provisions of Section 158BC(b)wherein it has been specifically mentioned that the AO shall proceed to determine the undisclosed income in the manner laid down in Section 158BB and the provisions of section 142 subsection (2), 143(2), 144, 145 so far as may apply. The court observed that it the intention of the legislature was to exclude the provisions of chapter XIV if would have indicated that. It was due to these express provisions making section 143(2) specifically applicable while computing the undisclosed income that the Supreme Court held that for making, enquiry the issue of notice u/s 143(2) was mandatory, On the other hand, the provisions of Sec. 153A or 153C nowhere specifically require the AO to compute the income after issuing the notice u/s. 143(2). The two provisions being entirely different, therefore, the ratio of the decision in the case of Hotel Blue Moon may not be applicable mutandis mutandis to the case of the appellant. 4.2. Section 153A(1) itself is the substantive section which mandatorily requires AO to make assessment of total income in all cases where search is initiated as the words used in this section is “shall” and not “may”. Similarly for the purpose of making assessment, the AO has to mandatorily issue the notice u/s 153A(1)(a) and after issuance of notice u/s 153A(1)(a) the AO has to mandatorily complete the assessment of total income u/s 153A(1)(b) by using other machinery provisions in so far as they apply. On the other hand the issuance of notice u/s 143(2) is not mandatory in all cases of returns filed under regular provisions as the words used therein are “may” and not shall”. Therefore discretion to make assessment u/s 143(3) or not is available to the AO by issue notice u /&143(2) only in case of regular assessment and he is required to issue such notice only when he considers it necessary to ensure that the income declared therein is not understated. The Limitation of issuing notice therein is only to put finality to the period till when such discretion needs to be exercised by the AO and to make assessee aware in a reasonable time that whether his case is going to be selected in scrutiny or not. But in a search case no such discretion of not making assessment u/s 153A(1) is available to AO. Therefore, the purpose of issue of notice u/s 143(2) can only be as a mechanism for providing the opportunity to the assessee and not as a provision to signify the exercise of discretion of AO to make enquiries for making assessment. Moreover once the assessee has been searched, he is aware that his total income is going to be mandatorily assessed under the provisions of 153A/C. Since 153A/C deal with assessment as a result of search only therefore it is imperative that it is the AO who has to ask the assessee to give explanation in respect of the seized documents u/s 142(1) whereas the language of the statutory notice u/s 143(2) itself suggest that it is for the assessee to enable him to file details suo moto in support the return filed by him/her. Since the return in response to notice u/s 153A/C after search is not a return filed by assessee suo-moto, hence there may not be much relevance of asking assessee to file details in support of the return. Hence the issue of notice u/s 143(2) is required only as a machinery provision to 7 Smt. Manorma V. Rathi Vs. The ACIT, Circle 21(1) allow the assessee opportunity of being heard in case of assessment in response of notice u/s 153A(1)(a). It is not disputed by the appellant that she was not given the opportunity of being heard. Hence non issuance or late issuance of notice u/s 143(2) will only be a matter of procedure having no mandatory requirement u/s 153A/C unlike the specific mention u/s 158BC(b). The use 0 expression “so far as may be” for applicability of other provisions u/s 153A(1)(a), would mean only when such provisions are required to be applied only if required and so far as they are not in conflict with substantive provisions of 153A(1). In case of Dr Paratap Singh 155 ITR 166(SC), the apex court interpreted the expression “so far as may be” to mean that those provisions may be followed to the extent possible. Similarly in case of Ujagar Print 75 CTR(SC)1 the apex court while explain the impact of the word “so far as may be” ,has held that provisions of 1944 Act shall apply “so far as may be” this is to the extent necessary and practical for purposes of 1957 Act as well. Therefore the condition of issue of notice u/s 143(2) is not applicable to asstt u/s 1S3A(1)(b) and that all notice is required to be issued, it is to give an opportunity as per natural justice. As already stated that the appellant has filed necessary details in response to notice u/s 142(1) and also attended during the assessment proceedings, hence there is no occasion where appellant can claim that she was not given proper opportunity. 4.3. Further, the supreme court) in case of Hotel Blue Moon(supra) has also observed that notice u/s 143(2) becomes necessary only where it is necessary to check the return and where the block return conforms to the undisclosed income inferred by the authorities, there is no reason why the authorities should issue notice u/s 143(2). Since the assessment in case of appellant has been made on the returned income itself as per the revised return filed by the assessee, on the basis of evidence found during the search and no further enquiries have been made by the AO, therefore even otherwise there was no requirement of issuing notice u/s.143(2) for purpose of making any enquiry as per the decision of supreme court(supra). Therefore even on facts, the case of Hotel blue Moon is distinguishable. Hence the plea of the appellant that the assessment u/s 153C without issue of notice u/s 143(2) is invalid cannot be upheld.

(2001) 337 ITR 399 (2012) 20 taxman.com 387 (Del); (ii) Tarsem Singla Vs. DCIT, CC-III, Ludhiana (2017) 81 taxman.com 347 (P &H); (iii) Roshanlal Verma Vs. DCIT, CC-11, Faridabad (2018) ITAT Delhi. We have also perused the decision of Hon’ble Supreme Court in the case of Hotel Blue Moon 321 ITR 362 referred by the assessee and noticed that the said judgement was in the context of Section 158BC. Clause B(b) of Sec. 158BC expressly provides that the A.o shall proceed to determine the undisclosed income of the Block period in the manner laid down in Sec. 158BB and the provision of Sec. 142(2) and (3) of Sec. 143, Sec. 144 and Sec. 145 as far as applied. The Hon’ble Supreme Court decision clearly applicable in the context of Sec. 158BC and not in the context of Sec. 153A & Sec. 153C.

We have also perused the decision of Hon’ble Madras High Court in the case of Kuvendran Vs. DCIT (Madras High Court) W.P. No. 3020 of 2020, dated 09.04.2021: wherein held that Sec. 153A only states that assessment in terms of (Madras High Court) Conclusion Section 153A only states that an assessment in terms thereof shall be completed in terms of the provisions of the income Tax Act, 1961 as such return were a return required to be furnished under Section 139 It would thus suffice that m framing an assessment under Section 153A, due regard must be given to the principles of natural justice this requirement will stand satisfied either by issuance of notice under Section 143(2) or a question-naire under Section 142(1) Therefore, a notice under Section 143(2) was not to be mandatorily issued prior to completion of an assessment in consequence of a notice under Section 153C. The issue arose for consideration was whether a notice under Section 143(2) was to be mandatorily issued prior to completion of an assessment in consequence of a notice under Section 153C it was held that the difference in the language of Section 158 BC and Section 153A must be attributed sufficient weightage While there is specific reference to the provisions of Section 143(2) in Section 158 BC, such reference is conspicuous by the absence in Section 153A; Section 153A only states that an assessment in terms thereof shall be completed in terms of the provisions of the Income Tax Act, 1961 as if such return were a return required to be furnished under Section 139 It would thus suffice that in framing an assessment under Section 153A, due regard must be given to the principles of natural justice, which requirement will stand satisfied either by issuance of notice under Section 143(2) or a question-naire under Section 142(1). It is also to be noted that S. 153A provides for the procedure for assessment in case of search or requisition. Sub-S. (1) starts with non-obstante clause stating that it was “notwithstanding anything contained in ss. 147, 148 and 149, etc. Clause(a) thereof provides for issuance of notice to the person searched under s. 132 or where documents etc are requisitioned under s. 132(A), to furnish a return of income. This clause nowhere prescribes for issuance of notice under s. 143(2).”