MANAKSIA LIMITED,KOLKATA vs. DCIT, CIRCLE 4(1), , KOLKATA

At the time of hearing, the ld. Counsel for the assessee pressed the ground no.3, which is extracted as under: - “3. That, the Ld. CIT(A) further erred in law in sending the reassessment order back to the A.O. without considering that the said reassessment order suffered from technical deficiencies for not having issued notice u/s 143(2) of the Act and hence the reassessment order set aside by the Ld. CIT(A) was void ab initio for want of valid jurisdiction, as decided in the case of ACIT vs. Hotel Bluemoon (2010) 321 ITR 362 (SC).”

The assessee challenged the said assessment before the ld. CIT (A), however, the ld. CIT (A) without considering the submission of the assessee restored the appeal back to the file of the ld. AO for fresh adjudication on the ground that the ld. AO passed the ex-parte order without considering the merit.

The ld. DR on the other hand relied on the order of the authorities below.

After hearing the rival contentions and perusing the materials available on record, we find that the assessee filed the original return of income on 13.10.2010, declaring total income of ₹66,06,603/-. The case of the assessee was selected for scrutiny and the assessment was accordingly framed u/s 143(2) of the Act on 20.03.2014, accepting the return of income. The case of the assessee was subsequently reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 31.03.2017, which was complied with by filing the return of income on 28.04.2017, declaring total income of ₹66,06,606/-, copy of which is available at page no. 97 of the Paper Book. We note that the assessee addressed vide letter dated 23.01.2017 to Dy. Commissioner of Income Tax, Circle 4(2), P-7, Chowringhee Square, Kolkata, wherein the assessee specifically stated that the assessee has filed the return of income in response to notice u/s 148 of the Act and requested the ld. AO to make available or supply the reasons recorded u/s 148 (2) of the Act. However, the ld. AO has not supplied any reasons. We even note that the assessment was framed vide order dated 22.06.2017, u/s 144 read with section 147 of the Act and only thereafter supplied the reasons to the assessee on 04.04.2017. We have also perused the assessment order and confronted this issue to “15. We may now revert back to Section 158 BC(b) which is the material provision which requires our consideration. Section 158 BC(b) provides for enquiry and assessment. The said provision reads "that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall. so far as may be, apply." An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158-BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the Section 158 BC(b) specifically refers to some of the provisions of the Act which "7. Section 148 of the Act permits the issuance of a notice in certain circumstances when it is discovered that income has escaped assessment and sub-section (1) thereof mandates a return to be filed upon an assessee being served a notice under such provision, whereupon "the provisions of this Act, shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139."

In DIT v. Society for Worldwide Interbank Financial Telecommunications [2010] 323 ITR 249 (Delhi), this Court invalidated an reassessment proceedings after noting "the provisions contained in sub-Section (2) of Section 143 is mandatory and the legislature in their wisdom by using the word 'reason to believe' had cast a duty on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim, In view of the above, after receipt of return in response to notice under Section 148, it shall be mandatory for the AO to serve a notice under sub-Section (2) of Section 143 assigning reason therein. In absence of any notice issued under sub Section (2) of Section 143 afterreceipt of fresh return submitted by the Assessee in response to notice under Section, the entire procedure adopted for escaped assessment, shall not be valid."

In a subsequent judgment in CIT v. Salarpur Cold Storage (P.) Ltd. (2014) 50 taxmann.com 105/[2015] 228 Тахтan 48 (All.) (Mag.) it was held as under "10. Section 292 BB of the Act was inserted by the Finance Act, 2008 with effect from 1 April 2008, Section 292 BB of the Act provides a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. The axsexsee is precluded from taking any objection in any proceeding or enquiry that the notice was (1) not served upon him; or (ii) not served upon him in time; or (iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to Section 292 BB of the Act, however, carves out an exception to the effect that the Section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292 BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under Section 143 (3) of the Act. it is necessary to issue a notice under Section 143 (2) of the Act and in the absence of a notice under Section 143 (2) of the Act, the assumption of jurisdiction itself would be invalid."

In the same decision in Salarpur Cold Storage (P.) Ltd. (supra), the Allahabad High Court noticed that the decision of the Supreme Court in Hotel Blue Moon (supra) where in relation to block assessment, the Supreme Court held that the requirement to issue notice under Section 143(2) was mandatory. It was not "a procedural irregularity and

In the result, the appeal of the assessee is allowed.