NADIA DISTRICT CENTRAL CO-OPERATIVE BANK LTD.,NADIA vs. PCIT-1, KOLKATA

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ITA 763/KOL/2024Status: DisposedITAT Kolkata15 January 2025AY 2018-1910 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the notice issued under Section 143(2) of the Act dated 22.02.2019 was not in conformity with the formats prescribed by CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017. The Tribunal noted that paragraph 3 of the instruction clearly stated that all notices under Section 143(2) shall henceforth be issued in these revised formats only. The Tribunal found merit in the assessee's contention that the notice was defective. Consequently, the assessment framed on the basis of this invalid notice was also held to be invalid, and so were the revisionary proceedings based on such an assessment. The Tribunal relied on the decisions of co-ordinate benches in Srimanta Kumar Shit Vs. ACIT and Shib Nath Ghosh Vs. ITO, which held that notices not conforming to CBDT instructions render the assessment invalid. The Tribunal allowed the additional ground raised by the assessee. The Tribunal did not adjudicate the other issues on merit as they became academic. The appeal of the assessee was allowed by quashing the order passed under Section 263.

What were the facts?

The assessee, Nadia District Central Co-operative Bank Ltd., filed an appeal against the order of PCIT-1, Kolkata, dated 21.12.2023, for Assessment Year 2018-19. The appeal challenged the revisionary jurisdiction exercised by the PCIT under Section 263 of the Income Tax Act, 1961. The assessee also raised an additional ground regarding the validity of the notice issued under Section 143(2) of the Act on 22.09.2019. The assessee contended that this notice was not issued in compliance with CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017, rendering the subsequent assessment proceedings under Section 143(3) and the revisionary proceedings under Section 263 invalid and without jurisdiction. The assessment order itself was passed on 10.04.2021.

What were the issues?

1. Whether the notice issued under Section 143(2) of the Income Tax Act, 1961, dated 22.09.2019, is invalid for non-compliance with CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017, thereby rendering the assessment proceedings under Section 143(3) and revisionary proceedings under Section 263 void? (Question of law and fact, turning on Section 143(2) and CBDT Instruction F.No.225/157/2017/ITA-II). Assessee's contentions: The CBDT Instruction dated 23.06.2017 mandates specific formats for issuing notices under Section 143(2). The notice dated 22.02.2019 issued to the assessee did not conform to any of the three prescribed formats. Therefore, the assessment framed based on this invalid notice, and consequently the revisionary proceedings, are without jurisdiction and liable to be quashed. Relied on co-ordinate bench decisions in Srimanta Kumar Shit Vs. ACIT and Shib Nath Gosh Vs ITO. Revenue's contentions: The CBDT instruction directed the use of revised formats only for notices issued after the instruction date. The notice was generated online, and the system director had not yet effected necessary changes in the ITBA module. Therefore, the notice was issued in a different format due to system limitations, and the assessee's argument should be dismissed.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(2),Section 143(3),Section 119

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri S.K. Tulsiyan, AR &, Shri P.K. Roy & Puja Somani, ARs
For Respondent: Shri P.N. Barnwal, DR
Hearing: 07.01.2025Pronounced: 15.01.2025

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 21.12.2023 for the AY 2018-19.

2. The assessee has challenged the exercise of revisionary jurisdiction by ld. PCIT u/s 263 of the Act as invalid without satisfying twin conditions as envisaged u/s 263 of the Act. Besides the assessee has raised an additional ground of appeal, which is extracted below:-

“That the ld. AO erred in issuing notice u/s 143(2) of the Act dated 22.09.2019 without complying to the CBDT Instruction F.No.225/157/2017/ITA-II dated 23.06.2017 and so the notice issued u/s 143(2) is not valid as per law and hence the entire assessment proceedings u/s 143(3) of the Act and consequent

4. The ld. AR vehemently submitted before us that the CBDT vide instruction no. F.No.225/157/2017/ITA-II dated 23.06.2017, prescribed that the notices u/s 143(2) of the Act to be issued in a specific format. The ld. AR submitted that the said CBDT instruction is mandatory in nature and the authorities below are under application to comply with the said instruction. The ld. AR stated that the said instruction has prescribed three formats for issuing notices namely (i) limited scrutiny (computer aided scrutiny selection), (ii) complete scrutiny (computer aided scrutiny selection) and (iii) Compulsory manual selection.

5.

The ld. Counsel for the assessee also filed before us the copies of these notices u/s 143(2) of the Act in three formats, from page no. 2 to 4 of the paper book. Thereafter, the ld. Counsel for the assessee also filed a physical copy of the notice actually issued u/s 143(2) of

6.

The ld. DR on the other hand strongly opposed the arguments the ld. AR by submitting that the CBDT vide the said above instruction has directed to issue the notice u/s 143(3) of the Act after the date of said instruction in the revised formats only which was specified in the instruction itself. However, the system director is effecting necessary changes in the ITBA module in that regard. The ld. AR argued that since the notice has been generated on line and not issued by the AO manually ,therefore, the observations of the ld. AR deserved to be dismissed at the very first stage because, the system director could not make the necessary changes in the ITBA Module and hence the notice was issued in a different format.

“F.No.225/157/2017/1TA.11 Government of India Ministry of Finance Department of Revenue (CBDT) North Block, New Delhi, dated the 23rd of June, 2017 To All Pr. CCsIT/Pr. CCIT(International-tax)/CCIT(Exemptions)/Pr. DsGIT Sir/Madam Subject: - Issue of notices under section 143(2) of Income-tax Act, 1961 in revised format-regd.- With reference to the above, I am directed to state that Central Board of Direct Taxes has decided to modify format of notice(s) issued under section 143(2) of the Income-tax Act which intimate the concerned assesse about selection of his/her case for scrutiny. This has become necessary in view of Board's decision to utilise 'E-Proceeding' facility for electronic conduct of assessment proceedings in a widespread manner from this financial year.

2.

The three formats of notice(s) are: Limited Scrutiny (Computer Aided Scrutiny Selection)

4.

The above may be brought to the notice of all for necessary compliance. Enclosures(s): as above Sd/- (Rohit Garg) Director-ITA.II,” 08. After hearing the rival contentions and perusing the materials available on record including the above instruction, we find that the post 23.06.2017, the notice u/s 143(2) of the Act was required to be issued in any of the three formats mentioned in the said instructions above. We further note that in para 3 of the said instruction it is stated that all notice u/s 143(2) of the Act shall henceforth be issued in this revised format only. Therefore, we find merit in the contentions of the ld. AR that the notice dated 22.02.2019, issued u/s 143(2) of the Act is not conforming to the formats of notices as prescribed in the above said instruction. For the sake of ready reference the said notice is also extracted below:-

Leave Blank intentionally

9.

Therefore considering the defect in the issuance of notice , we are ofd the considered view that the assessment framed on the basis of said notice is invalid and so is the revisionary proceeding based on the said assessment framed. The case of the assessee find support from the decision of the co-ordinate Bench in the case of Srimanta Kumar Shit (supra) as we referred to above. For the sake of ready reference, the operative part is reproduced below:-

“12. A perusal of the above format would indicate that though in the heading, it exhibits limited scrutiny (Computer Aided Scrutiny Selection) but thereafter in the first paragraph, it only talks of scrutiny and then in second paragraph, it talks upon the opportunity being provided to the assessee what he wants to say in support of the return. It is pertinent to observe that in para one, the ld. AO has to identify the issues for examination. If this proforma is being read with the first paragraph of the assessment order, then, it would reveal that in the third line of the first paragraph, ld. Assessing Officer has used the expression

12.

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

Order pronounced in the open court on 15.01.2025.

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