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Facts
The Assessing Officer (AO) initiated reassessment proceedings under Section 147 for A.Y. 2013-14 and 2014-15 based on unexplained cash deposits of Rs. 10,77,200/- in the assessee's bank account, treating them as unexplained money under Section 69A. In response to a Section 148 notice, the assessee filed a delayed return of income. However, the AO disregarded this delayed return as invalid and proceeded to frame a best judgment assessment under Section 144 without issuing the mandatory notice under Section 143(2) of the Act.
Held
The Tribunal held that a return of income filed in response to a Section 148 notice, even if delayed, is a valid return. The AO was statutorily obligated to issue a notice under Section 143(2) after such a return was filed. The absence of a Section 143(2) notice renders the assessment order void, and Section 292BB only cures infirmities in the manner of service, not the complete absence of notice. Consequently, the assessment orders passed by the AO were quashed due to invalid assumption of jurisdiction.
Key Issues
1. Whether a return of income filed in response to a Section 148 notice, even if delayed, is to be considered a valid return. 2. Whether the Assessing Officer can dispense with the mandatory issuance of a Section 143(2) notice and frame a best judgment assessment under Section 144. 3. Whether the non-issuance of a Section 143(2) notice can be saved by the provisions of Section 292BB of the Act.
Sections Cited
147, 144, 144B, 250, 148, 69A, 143(2), 143(3), 234A, 292BB, 139, 142(1), 54F, 80P
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Income Tax Appellate Tribunal, Hyderabad ‘ SM-B’ Bench, Hyderabad
O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.
The captioned appeals filed by the assessee are directed against the respective orders passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 08.01.2025, which in turn arises from the respective orders passed by the Assessing Officer under Section 147 r.w.s. 144 r.w.s. 144B of the Income Tax Act, 1961 (for short “the Act”) dated 29.03.2022 for A.Y. 2013-14 and A.Y. 2014-15, respectively. As common issues are involved in the captioned appeals, therefore, the same are taken up and disposed of by this consolidated order.
We shall first take up the appeal filed by the assessee for A.Y. 2013-14 in wherein the impugned order has been assailed on the following grounds of appeal before us:
“1. On the facts and in the circumstances of the case, the order passed by the learned CIT (A), NFAC, Delhi u/s. 250 of the Act for the AY 2013- 14 is erroneous and bad in law.
2. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the act of the learned A.O. who passed the order u/s 147 of the Act for the AY 2013-14 which is erroneous and bad in law as the notice u/s 148 of the Act was issued in a routine and mechanical manner without proper application of mind and the proceedings were initiated purely on the basis of AIR information. There was no effort to properly ascertain if there was, in fact, any escapement of income for the AY 2013-14 by the learned A.O. Hence, the learned CIT (A), NFAC, Delhi erred in upholding the act of the learned A.O. who completed the assessment u/s 147 of the Act on the basis of an invalid notice u/s 148 of the Act as the same needs to be treated as invalid and void ab initio.
3. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the act of the learned A.O. who reopened the assessment without any tangible information on record, which is against the decision of the Hon. Supreme Court of India in the case of CIT vs. Kelvinator India Ltd (2010) 187 Taxmann 312.
4. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the act of the learned A.O., Ward-1, Suryapet who issued the notice u/s 148 of the Act on 31/03/2021 which is invalid as it has not been digitally signed by him as per the procedure prescribed and hence is not a valid notice. Hence, any re- opening proceedings u/s 147 of the Act initiated and conducted on the basis of an invalid notice u/s 148 of the Act are also invalid.
On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the assessment order passed u/s. 147 rws 144 rws 1448 of the Act, as the order is not digitally signed, since the digital signature is shown as invalid on Page no. 12 of the assessment order and hence the said order is invalid. 6. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding act of the learned A.O who erred in reopening the assessment for the AY 2013-14 on presumptions, surmises and mere suspicion, which act of the learned A.O is against the intention of legislature in introducing the provisions of section 147 of the Act. 7. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding act of the learned A.O who erred by not giving proper reasons for reopening the assessment proceedings and further erred by not following the procedure laid down for re assessment proceedings and against the decision of Hon. Supreme Court of India in the case of GKN Drive shafts (India) Ltd vs. DCIT (2003) 259 ITR 19 SC. 8. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the act of the learned AO who ought to have considered the submissions made by the appellant and the sources explained for the cash deposits of Rs. 13,68,699/- during the reassessment proceedings for the AY 2013-14. 9. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the order passed by the learned AO, National Faceless Assessment Centre u/s 147 rws 144 & 1448 of the Act for the AY 2013-14 which is erroneous and bad in law as the additions were made on assumptions and in an arbitrary manner by making an addition of Rs.13,68,699/- by treating the entire amount of cash deposited in the bank accounts as unexplained money u/s 69A ignoring the submissions and contentions made by the appellant that they do not bear the characteristic of income and that the above amount deposited in bank pertain to the firm M/s. R P Granites, Mudigonda, Khammam of which the appellant s wife is the Managing Partner and that the same were accounted for in the books of accounts of M/s. RP Granites.
10. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the act of the learned AO where it is pertinent to note that the final assessment orders for AY 2013-14 passed u/s 147 rws 144 rws 144B is not uploaded on the portal even as on the date of filing the appeal before the honourable ITAT. The soft copies of the orders were emailed by the jurisdictional AO to the appellant on 25.07.2022 in response to a grievance raised. Accordingly, it is the contention as well as the submission of the appellant that no final assessment orders have been passed by the learned AO on or before the prescribed due date of 31/03/2021 and as such the reopened proceedings u/s 147 are barred by limitation and hence, any orders passed thereafter shall be treated as invalid deemed to be null and void ab-initio and that any demand raised on an assessment that has been barred by limitation shall also become invalid and infructuous.
Also, the assessee has raised an additional ground of appeal which, reads as under:
“On the facts and in the circumstances of the case, the assessment done u/s. 147 of the Act for the AY 2013-14 is invalid as no notice u/s 143(2) of the Act wat served on the appellant by the learned AO to assumed jurisdiction, Hence, the assessment order passed u/s. 147 r.w.s. 144 r.ws. 148 of the Act is bad in law and hence, invalid, especially when the learned AO has adopted income disclosed in ITR as the basis for completing the assessment by making additions to the income returned.”
As the assessee by raising the aforesaid “additional ground of appeal” has sought our indulgence for adjudicating a legal issue which would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383 (SC).
5 Succinctly stated, the assessee had filed his return of income for A.Y. 2013-14 on 21.07.2014, declaring an income of Rs.5,23,700/-. Subsequently, the A.O. based on the information that the assessee had during the subject year though made cash deposits of Rs. 10,77,200/- in his bank account No. 068401504889 maintained with ICICI Bank, Branch: Khammam, Telangana, but had failed to explain the source of the same in the course of the proceedings before the ADIT (Investigation), Unit-1, Vijayawada, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act, dated 31.03.2021 was issued by the A.O., wherein the assessee was called upon to file his return of income for the subject year. Although, the assessee failed to file his return of income within the prescribed period of 30 days from the date of service of the notice u/s 148 of the Act, dated 31.03.2021, but, thereafter, filed the same on 17.01.2022 declaring the same income as was originally returned by him, Page 66 of APB.
During the course of assessment proceedings, the A.O. called upon the assessee to put forth an explanation regarding the source of the cash deposits of Rs.10,77,200/- made in his bank Account No. 068401504889 maintained with ICICI Bank, Branch: Khammam, Telangana. In reply, it was claimed by the assessee that the subject cash deposits were sourced out of, viz. (i). cash withdrawals made from his bank account; (ii). cash in hand available with him; and (iii). out of the cash sale proceeds of granite that was received by him on behalf of M/s. R.P. Granites, Mudigonda, Khammam, i.e. a concern in which his wife Smt. Kollu Jyothi was a managing director. However, as the assessee was neither able to substantiate his aforesaid explanation based on any supporting documentary evidence; nor the same was found to be realistic, therefore, the A.O. rejected it and held the entire amount of cash deposits as having been sourced out of the assessee’s unexplained money u/s 69A of the Act. Accordingly, the A.O. vide his order passed under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022, determined the income of the assessee at Rs.10,77,200/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. Ostensibly, as the assessee despite having been afforded sufficient opportunities, had failed to participate in the proceedings before the CIT(A), therefore, the latter proceeded with the case on an ex parte basis and finding no infirmity in the view taken by the A.O., upheld the addition of Rs.10,77,200/- made by him u/s 69A of the Act and dismissed the appeal.
8. The assessee, being aggrieved with the order of CIT(A) has carried the matter in appeal before us.
We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
As the assessee/appellant based on the additional ground of appeal raised before us has assailed the validity of the jurisdiction that was assumed by the A.O. for framing the assessment vide his order passed under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022, therefore, we shall first deal with the same.
11. Shri Y.V. Bhanu Narayan Rao, C.A. the learned Authorized Representative (for short, “ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the A.O. had grossly erred in law and on the facts of the case in assuming jurisdiction for framing the impugned assessment. Elaborating on his contention, the Ld. AR submitted that though the assessee in response to the notice issued under Section 148 of the Act, dated 31.03.2021 had admittedly filed his return of income on 17.01.2022 declaring an income of Rs.5,23,700/-, but, the A.O. despite being in knowledge of the said “return of income” available on his record had most arbitrarily brushed aside the same and framed the impugned assessment without issuing notice u/s 143(2) of the Act. The Ld. AR to buttress his claim that the assessee in compliance to the notice issued under Section 148 of the Act, dated 31.03.2021 had filed his return of income on 17.01.2022 (supra), drawn our attention to Page 2/Para 5 of the assessment order wherein the A.O. had mentioned of the filing of the aforesaid “return of income” by the assessee. Apart from that, the Ld. AR to dispel all doubts about the aforesaid factual position as was canvassed by him before us, had taken us through the copy of the “return of income” declaring an income of Rs.5,23,700/- that was filed by the assessee on 17.01.2022, i.e in response to the notice issued under Section 148 of the Act, dated 17.01.2022, (Page 67 of the APB.) Carrying his contention further, the Ld. AR submitted that now when the assessee had filed his return of income in compliance to the notice issued under Section 148 of the Act, dated 31.03.2021, therefore, the A.O. was statutorily obligated to have issued a notice u/s 143(2) of the Act, and further ought to have framed the assessment u/s 147 r.w.s. 143(3) of the Act. Also, the Ld. AR submitted that the A.O. while framing the assessment vide his order passed under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022, had though considered the returned income of the assessee at Rs.5,23,700/- but had grossly erred in law in not issuing the statutory notice u/s 143(2) of the Act. The Ld. AR to buttress his aforesaid contention had drawn our attention to the quantification/determination of the assessed income of the assessee, wherein the A.O. based on the income returned by the assessee of Rs.5,23,700/- has assessed his income at Rs. 16,86,300/-. The Ld. AR based on his aforesaid contention, submitted that as the A.O. had traversed beyond the scope of his jurisdiction and framed the impugned assessment without issuing a notice u/s 143(2) of the Act, i.e by acting upon the “return of income” that was filed by the assessee on 17.01.2022 in response to the notice issued under Section 148 of the Act, dated 31.03.2021, therefore, the assessment framed by him cannot be sustained and is liable to be quashed for want of valid assumption of jurisdiction. The Ld. AR to fortify his contention that the assessment framed in the absence of a notice u/s 143(2) of the Act goes to the root of the validity of the jurisdiction assumed by the A.O. had relied upon the order of ITAT, Hyderabad Bench in the case of Sri Lakshmi Finance, Nalgonda Vs. Income Tax Officer, Ward–1, Suryapet, in dt.20.03.2025
12. Per contra, Shri Srikanth Reddy Y., the learned Departmental Representative (for short “Ld. DR”) relied upon the orders of lower authorities. The Ld. DR submitted that as the assessee had failed to file his “return of income” within the prescribed period of 30 days allowed by the notice issued u/s 148 of the Act, dated 31.03.2021, therefore, the A.O. in the absence of a valid return of income had rightly refrained from issuing notice u/s 143(2) of the Act. The Ld. DR to buttress his aforesaid contention took us through the observations of the A.O. in the assessment order, wherein it was observed by him that as the assessee had deliberately delayed the filing of the return of income to frustrate the assessment proceedings, therefore, for the said reason the notice u/s 143(2) was not issued to him. Alternatively, the Ld. DR submitted that as the assessee had not objected to the validity of the jurisdiction assumed by the A.O. in the course of the assessment proceedings, but on the contrary had participated in the proceedings before the AO, therefore, the non-service of notice u/s 143(2) of the Act was saved by the provisions of Section 292BB of the Act.
We have thoughtfully considered the issue in hand, i.e. the validity of the order passed by the A.O. under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022 brushing aside the “return of income” (though delayed) that was filed by the assessee in response to the notice issued by the A.O. under Section 148 of the Act, dated 31.03.2021, and thereafter dispensing with the issuance of notice u/s 143(2) of the Act framing a best judgment assessment vide order passed u/s 147 r.w.s 144 of the Act.
We may herein observe, that our indulgence has been sought for adjudicating three issues, viz. (i). that as to whether or not the “return of income” filed by the assessee beyond the period prescribed in the notice u/s 148 of the Act is to be construed as a “return of income” filed in compliance to the aforesaid notice; (ii). that as to whether or not in a case where the assessee in compliance to the notice issued under Section 148 of the Act (supra) had filed his return of income, then can the A.O. dispense with the notice u/s 143(2) of the Act and frame a best judgment assessment u/s 144 of the Act, i.e without taking cognizance of the said “return of income”; and (iii). that as to whether or not the non-issuance of the notice by the A.O. u/s 143(2) of the Act can be saved by the provisions of Section 292BB of the Act.
Before proceeding any further, we may herein observe that the A.O. had issued a notice u/s 148 of the Act, dated 31.03.2021 to the assessee, wherein he was called upon to file his return of income within a period of 30 days from the date of service of the subject notice, Page No.66 of APB. Admittedly, the assessee had though not filed his return of income within the prescribed period of 30 days from the date of service of notice u/s 148 of the Act, dated 31.03.2021, but had filed the same as on 17.01.2022, declaring the same income as was originally returned i.e. much before the culmination of the assessment proceedings, Page 67 of APB. The fact that the assessee had filed his return of income in compliance to the notice issued under Section 148 of the Act, dated 31.03.2021 is not disputed by the department, as the A.O., in the body of the assessment order had categorically admitted the said fact by observing as under:
“Accordingly, no notice u/s 143(2) was issued as the delay has been deliberate and planned on the part of the assessee to frustrate the assessment proceedings. Further, as the contents as disclosure as per the ITR filed u/s 139(1) and u/s 148 are same, the figures disclosed in original return will hold good.”
Ostensibly, the A.O. had refrained from considering the “return of income” filed by the assessee in compliance to the notice issued under Section 148 of the Act, dated 31.03.2021, for the reason that he was of the view that as the same was filed beyond the prescribed period of 30 days from the date of service of the said notice, therefore, the same was invalid and non-est in the eyes of law. Further, we find that the A.O. to fortify his view had drawn support from certain judicial pronouncements, wherein it has been held that in a case when a return of income was filed after a long delay, there was no need for the A.O. to issue notice u/s 143(2) of the Act. At this stage, we may herein observe that though the assessee before us had failed to file the “return of income” within the prescribed period of 30 days (supra), but he had thereafter filed the same on 17.01.2022 i.e. two months before the passing of the assessment order by the A.O. on 29.03.2022.
Before proceeding any further, we shall first deal with the Ld. DR’s contention that as the assessee had not assailed the validity of the AO’s jurisdiction in the course of the assessment proceedings, therefore, the same cannot now be allowed to be raised in the course of the present appellate proceedings before the Tribunal. We have thoughtfully considered the aforesaid contention of the Ld. DR and are unable to persuade ourselves to concur with the same. We find that the Hon’ble High Court of Bombay in the case of CIT Vs. Pruthvi Brokers & Shareholders (P) Ltd. (2012) 349 ITR 336 (Bom), had held that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities but is also entitled to raise additional claims before them. We, thus, in terms of the aforesaid settled position of law are of the firm conviction that the assessee in the present case before us remained well within his right to assail the validity of the jurisdiction that was assumed by the A.O, wherein the latter had after treating the delayed “return of income” filed by the assessee in response to the notice issued under Section 148 of the Act as invalid and non-est in the eyes of law, dispensed with the statutory requirement of issuing notice u/s 143(2) of the Act and framed a best judgment assessment vide his order passed under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022.
We shall now deal with the Ld. DR’s contention, that as the assessee had delayed the filing of his return of income in compliance to the notice issued under Section 148 of the Act, dated 31.03.2021 i.e. filed the same beyond the prescribed period of 30 days on 17.01.2022, therefore, the A.O. had rightly refrained from issuing notice u/s 143(2) of the Act, and had framed the assessment to the best of his judgment vide his order passed under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022.
Admittedly, it is a matter of fact borne from the record that the assessee pursuant to the notice u/s 148 of the Act, dated 31.03.2021, had filed his “return of income” beyond the prescribed period of 30 days i.e. on 17.01.2022. We are of the firm conviction, that merely for the reason that the assessee had delayed the filing of his “return of income” in compliance to the notice u/s. 148 of the Act, dated 31.03.2021, and had filed the same on 17.01.2022, i.e. after the lapse of the prescribed period allowed in the aforesaid notice, the same could by no means form a basis for treating the said “return of income” as invalid. Our aforesaid conviction is fortified by the fact that in case of a delay involved in filing the “return of income” in compliance to the notice under Section 148 of the Act, i.e. furnishing of the same after the “due date”, the assessee is visited with the levy of interest for the delayed period u/s. 234A of the Act. On a bare perusal of Section 234A(3) of the Act, it transpires that though the said statutory provision contemplates that the delay involved in the filing of a “return of income” in response to the notice under Section 148, i.e. furnished after the “due date” is to be subjected to levy of interest, but the same in no way provides that the “return of income” so filed is to be held as invalid. Our aforesaid view is fortified by the order of the ITAT, Mumbai in the case of Smt. Amina Ismil Rangari Vs. ITO, Ward-17(2)(4), dated 15.09.2017. In the aforesaid case, the assessee's claim for exemption u/s. 54F of the Act was declined by the A.O., for the reason that the same was raised in her “return of income” that was filed u/s. 148 of the Act beyond the specified period. The A.O. was of the view that as the “return of income” filed in compliance to the notice u/s. 148 of the Act was not a valid "return of income", thus, the assessee was not entitled to the claim of exemption u/s. 54F of the Act as was so raised by her. On appeal, the aforesaid view of the A.O. was vacated by the Tribunal. It was observed that the “return of income” filed by the assessee beyond the specified period contemplated in the notice u/s. 148 of the Act would though lead to characterizing the same as a “return of income” filed beyond the prescribed period, but the same would not cease to be a “return of income” filed in response to the notice u/s. 148 of the Act. For the sake of clarity, the observations of the Tribunal are culled out as under:
"7. We find from the facts available on record that the assessee had not voluntarily filed the 'return of income' u/s. 139 for the year under consideration. That it was only when a notice u/s. 148 was issued and served on the assessee on 30.03.2010, calling upon her to file the 'return of income' within a period of 30 days from the date of service of the said notice, that the same was filed on 10.08.2010, which having been filed beyond the stipulated time period thus involved a delay. The assessee in her aforesaid 'return of income' had raised a claim for exemption u/s 54F of Rs.20,00,000/-. We find that the A.O while giving effect to the order passed by the CIT(A) deliberated on the entitlement of the assessee towards claim of exemption u/s 54F and concluded that as the assessee had failed to file the 'return of income' within the stipulated time period of 30 days from the date of service notice u/s 148, therefore, the same was not a valid return of income. We find that the A.O on the basis of his aforesaid observations thus being of the view that the claim for exemption u/s 54F raised by the assessee on the basis of the invalid return of income could not be allowed, thus, declined to allow the same.
We shall first advert to the observation of the A.O that as the 'return of income' filed by the assessee pursuant to notice issued u/s 148 was filed beyond the specified time period of 30 days from the date of service of notice, therefore, the same would be rendered as invalid, and resultantly the claim of exemption raised by the assessee u/s 54F in the said non est 'return of income' could not be allowed. We are unable to persuade ourselves to accept the aforesaid observation of the lower authorities. We are of the considered view that though a statutory obligation is cast upon the assessee to comply with the notice issued u/s 148 and file the 'return of income' in compliance thereto within the stipulated time period of 30 days, however, in case the same is filed by the assessee beyond the stipulated time period, then merely for the reason that some delay is involved in filing of the said 'return of income' would not render the same as invalid and non est. We are of the considered view that a 'return of income' filed by an assessee beyond the specified time period contemplated in the notice issued u/s 148, would though lead to characterizing the same as a 'return of income' filed beyond the stipulated time period, but however, the same would not cease to be a 'return of income' filed pursuant to the notice issued u/s 148, though involving some delay. We find that our aforesaid view is supported from the very fact that as per section 234A(3), where the 'return of income' in compliance to a notice u/s 148 is filed beyond the stipulated time period, then interest under the said statutory provision is imposed on the assessee till the date of furnishing of the same. We may herein observe that Clause (a) of Section 234A(3) clearly contemplates that a 'return of income' filed after the expiry of the stipulated time period shall still continue to be a 'return of income' filed by the assessee pursuant to the notice u/s 148. We find that our aforesaid view also stands fortified from the very fact that after the assessee had filed the 'return of income' pursuant to the notice u/s 148 on 10.08.2010, the same was acted upon by the A.O and a Notice u/s 143(2) was issued to the assessee, followed by culmination of the same into an assessment u/s. 143(3) r.w.s 147 of the 'Act'. We are of the considered view that now when issuance of a notice u/s 143(2) presupposes the availability of a 'return of income' of the assessee on record, therefore, now when in the present case the A.O acted upon the 'return of income' filed by the assessee, and issued a notice u/s 143(2), which thereafter had culminated into an assessment u/s 147 r.w.s 143(3), therefore, it would not be permissible on the part of the revenue to turn around and claim that no valid 'return of income' was filed by the assessee.
9. We now in the backdrop of our aforesaid observations that the 'return of income' filed by the assessee after the expiry of the time period specified in the notice u/s 148 continues to be a 'return of income' filed u/s 148, though involving some delay, would now deliberate upon the validity of the claim of the assessee raised u/s 54F. We have perused the statutory provision contemplated u/s 54F and are of the considered view that the same does not cast any statutory obligation on the part of assessee to file his return of income within the stipulated time period contemplated u/s 139 or 148 of the 'Act', as a precondition for entitling him to claim exemption under the said statutory provision. We are of the considered view that the reference to the term 'due date' for furnishing of return of income u/s. 139 as contemplated in section 54F(4) is in context of the time limit within which the amount which had not been appropriated by the assessee towards making of investment in the purchase and/or construction of the new residential house is permitted to be deposited in the 'Capital Gains Account Scheme, 1988', which thereafter is to be withdrawn and utilized as per the terms contemplated in the said statutory provision. We are of the considered view that Section 54F, neither provides as a pre-condition the requirement of filing of the 'return of income' by the assessee within the stipulated time period, nor places any embargo as regards claim of such exemption in a case the 'return of income' filed by the assessee involves some delay. We thus in the backdrop of our aforesaid observations are of the considered view that now when the assessee had raised the claim u/s 54F in the 'return of income' filed by her in compliance to notice u/s 148, therefore, it was obligatory on the part of the A.O to have deliberated on the entitlement of the assessee towards claim of exemption u/s 54F, on merits. We do not find ourselves to be in agreement with the observations of the A.O that the claim towards exemption u/s 54F raised by the assessee in her 'return of income' was liable to be scrapped solely for the reason that the filing of such 'return of income' involved some delay. We thus in light of our aforesaid observations set aside the order of the CIT(A), who we find had concurred with the view taken by the A.O that the assessee was not entitled towards claim of exemption u/s 54F. We however not being oblivious of the fact that due to dismissal of the claim of exemption in limine by the A.O, there had been no occasion for the lower authorities to have deliberated upon the satisfaction of the requisite conditions contemplated u/s 54F by the assessee, therefore, in all fairness restore the matter to the file of A.O for making the necessary verifications. We may however observe that as the assessee had during the course of the hearing of the appeal submitted complete details as regards his entitlement towards claim of exemption u/s 54F, which we find had been reproduced by the CIT(A) in his order dated. 29.03.2013, therefore, the A.O is directed to verify the genuineness and veracity of the claim of the assessee in the backdrop of the said facts and figures provided by the assessee. That in case the facts and figures provided by the assessee are found to be in order, then claim of exemption u/s 54F, as raised by the assessee shall be allowed. Needless to say, the A.O shall during the course of the set aside proceedings afford an opportunity of being heard to the assessee to substantiate his
aforesaid claim. The Ground of appeal no. 1 raised by the assessee is allowed for statistical purposes."
Also, we find that our aforesaid view is fortified by the judgment of the Hon'ble High Court of Kerala in the case of The Chirakkal Service Co-operative Bank Ltd. Vs. The Commissioner of Income Tax, (2016) 384 ITR 490 (Ker). The indulgence of the Hon'ble High Court was, inter alia, sought for adjudicating the following substantial question of law.
“Whether the return filed by the assessee beyond the period stipulated u/s 139(1)/139(4) or Section 142(1)/148 can be held as non-est in the eyes of law and has invalidated for the purpose of deciding exemption u/s 80P of the Income Tax Act, 1961 ?”
The Hon'ble High Court answered the aforesaid issue, and held, that the “return of income” filed by the assessee beyond the period stipulated under Section 139(1) or Section 139(4) or Section 142(1) or Section 148 can also be accepted and acted upon provided further proceedings in relation to such assessment are pending in the statutory hierarchy of adjudication in terms of the provisions of the Income-tax Act. As in the present case before us, the “return of income” filed by the assessee in compliance to the notice issued under Section 148 of the Act, dated 31.03.2021 was filed on 17.01.2022, i.e during the pendency of the assessment proceedings which had thereafter culminated vide order dated 29.03.2022, therefore, we are of the firm conviction that there was no justification for the A.O. to have held the said “return of income” as invalid and non-est in the eyes of law. Accordingly, based on our aforesaid observations, we are of the view that the “return of income” filed by the assessee on 17.01.2022 i.e in response to the notice u/s. 148 of the Act dated 31.03.2021, though delayed, did not cease to be a “return of income” in the eyes of law.
19. We shall now deal with the second facet of the controversy involved in the present appeal, i.e. as to whether or not the assessment framed by the A.O. vide his order passed u/s.147 r.w.s 144 r.w.s. 144B of the Act dated 29.03.2022, in absence of notice u/s. 143(2) of the Act having been issued by him is sustainable in the eyes of law?
Apropos the validity of the assessment framed by the A.O. vide his order passed under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022, wherein he despite being in knowledge of the “return of income” filed by the assessee on 17.01.2022 in response to the notice issued under Section 148 of the Act, dated 31.03.2021 (which has been held by us hereinabove to be a valid return of income), had by treating the said “return of income” invalid, dispensed with the statutory requirement of issuing a notice u/s 143(2) of the Act, and framed the assessment to the best of his judgment u/s 144 of the Act, dated 29.03.2022, we find that the said issue is covered by the judgments of the Hon'ble Supreme Court in the cases of ACIT and Anr. Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC) and CIT Vs. Laxman Das Khandelwal (2019) 417 ITR 325 (SC) and is no more res integra. The Hon'ble Apex Court in its aforesaid judicial pronouncements, had held, that the A.O. pursuant to the return of income filed by the assessee remains under the statutory obligation to issue notice u/s 143(2) of the Act for framing the assessment.
Our aforesaid view is further fortified by the judgment of the Hon’ble High Court of Delhi in the case of Pr. CIT Vs. Shri Jai Shiv Shankar Traders (P) Ltd. (2016) 3783 ITR 488 (Del). The Hon’ble High Court had held that the absence of notice u/s.143(2) of the Act impregnates the proceeding with a jurisdictional defect, and hence, renders it as invalid in the eyes of law. The aforesaid view had thereafter been reiterated by the Hon’ble High Court in the case of Pr. CIT Vs. Dart Infrabuild (P) Ltd., (2024) 166 taxmann.com 4 (Del). Also, the Hon’ble High Court of Allahabad in the case of CIT Vs. Salarpur Cold Storage (P) Ltd. (2015) 228 Taxman 48 (Allahabad) had after relying upon the judgment of the Hon’ble Apex Court in the case of CIT Vs. Hotel Blue Moon (supra), held that the requirement of issuance of notice u/s.143(2) of the Act was mandatory and cannot be brought within the meaning of a procedural irregularity. The Hon’ble High Court of Madras in the case of Sapthagiri Finance & Investments Vs. ITO, (2012) 25 taxmann.com 341 (Mad), had held that where the A.O found that there was a problem in the “return of income” filed by the assessee u/s.148 of the Act, which required an explanation, then he ought to have followed up by a notice u/s.143(2) of the Act. The Hon’ble High Court of Delhi in the case of Pr. CIT Vs. S.G Portfolio (P) Ltd. (2023) 454 ITR 761 (Del.) had, inter alia, held that where the assessee has filed a “return of income” in response to notice u/s. 148 of the Act, the A.O. was required to issue notice u/s.143(2) of the Act for framing the assessment. We further find that Hon’ble High Court of Madras in the case of Amec Foster Wheeler Iberia SLU-India Project Office Vs. DCIT, (2023) 148 taxmann.com 124 (Mad), has held that where the A.O did not issue notice u/s.143(2) of the Act upon the assessee, then the initiation of reassessment proceedings, order rejecting the assessee’s objection against the assumption of jurisdiction for reopening and also the reference to the TPO were to be quashed.
Apropos the Ld. DR’s claim that as the assessee in the course of the proceedings before the A.O had not objected to the assumption of the jurisdiction by him, and on the contrary participated in the assessment proceedings, therefore, the non- issuance of the notice u/s 143(2) of the Act will be saved by the provisions of Section 292BB of the Act, we are unable to concur with the same. We say so, for the reason that the deeming provisions of the said statutory provision only cures the infirmities in the manner of service of notice and is not intended to cure the complete absence of notice itself. Our aforesaid view is supported by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Laxman Das Khandelwal (2019) 417 ITR 325 (SC). The Hon’ble Apex Court relying on its earlier order in the case of ACIT Vs. Hotel Blue Moon (supra), had held that the failure to issue a notice under Section 143(2) renders the assessment order void even if the assessee has participated in the proceedings.
We thus, based on our aforesaid deliberations conclude as under:
(a). the “return of income” filed by the assessee on 17.01.2022 in response to the notice issued by the A.O. under Section 148 of the Act, dated 31.03.2021, having been filed during the pendency of the assessment proceedings which had culminated vide the order of assessment passed Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022, is a valid “return of income” though involving a delay.
(b). the A.O by treating the “return of income” filed by the assessee on 17.01.2022 in response to notice u/s 148, dated 31.03.2022 as invalid and non-est, had wrongly assumed jurisdiction by not acting upon the said “return of income”, and dispensing with the statutory obligation cast upon him to issue notice u/s 143(2) of the Act, had wrongly framed the impugned best judgment assessment vide his order passed under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022.; AND (c). that as the deeming provisions of Section 292BB of the Act only cures the infirmities in the manner of service of notice and is not intended to cure the complete absence of notice itself, therefore, the non-issuance of notice u/s 143(2) of the Act by the A.O. i.e by refraining from acting upon the “return of income” filed by the assessee on 17.01.2022 in response to the notice issued under Section 148 of the Act, dated 31.03.2021 will not be saved by the deeming provisions of the said statutory provision.
Accordingly, we are of the view that as the A.O in the present case before us, had erroneously held the “return of income” filed by the assessee on 17.01.2022 i.e in response to the notice u/s 148 of the Act, dated 31.03.2021 as invalid and non- est, and thereafter had on the said wrong premises dispensed with the statutory requirement of issuing the notice u/s 143(2) of the Act, and framed the impugned best judgment assessment vide his order passed under Section 147 r.w.s 144 r.w.s. 144B of the Act, dated 29.03.2022, therefore, the assessment order so passed by him cannot be sustained and is liable to be quashed for want of valid assumption of jurisdiction.
As we have quashed the assessment framed by the A.O. for want of valid assumption of jurisdiction, therefore, we refrain from adverting to and therein adjudicating the other issues, based on which, the impugned assessment has been assailed before us on the other grounds of appeal which, thus, are left open.
Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations.
As the facts and the issue involved in the present appeal qua the validity of the jurisdiction assumed by the A.O for framing the assessment, as has been assailed before us by the assessee appellant based on the “additional ground of appeal” remain the same as were there before us in his appeal for A.Y. 2013-14 in therefore, the order therein passed shall apply
Resultantly, the appeal filed by the assessee is also allowed on the same terms.
In the result, both the captioned appeals are allowed in terms of the aforesaid observations.