KALPANABEN NAYANKUMAR SHAH,AHMEDABAD vs. THE ITO, WARD-5(3)(1), AHMEDABAD

The facts of the case are that for both the years, the assessee had initially filed return of income which was subjected to scrutiny assessment and order passed u/s. 143(3) of the Act. Subsequently, the case of the assessee was re-opened for both the years, notice issued u/s. 148 of the Act and order passed & 1878/Ahd/2024 Kalpanaben Nayankumar Shah, A.Y. 2016-17 & 2017-18 u/s. 147 of the Act making addition to the income of the assessee on identical issue, holding two transactions of sale of shares undertaken by the assessee to be bogus. The one resulting in loss, which was claimed as a set off against short term capital gain earned by the assessee, was disallowed, while the transaction resulting in short term capital gain was treated as unexplained cash credit and addition made u/s. 68 of the Act. The CIT(A) confirmed the order of the Assessing Officer. Before us, the assessee has raised identical grounds of appeal in both the years which read as under:-

Since the issue involved in both the appeals is identical, I shall be dealing with the appeal of the assessee in /Ahd/24 and my decision therein will apply mutatis mundis to the other appeal in also.

During the course of hearing before us, the ld. counsel for the assessee first took up ground no. 1 contending that the order passed by the Assessing Officer was invalid since assessment was framed without issuing the mandatory jurisdictional notice u/s. 143(2) of the Act.

Ld.Counsel for the assessee first pointed out to me that this ground, though raised before the Ld.CIT(A), was not dealt with in his order.

Thereafter, the ld. counsel for the assessee contended that it is settled law that for framing of valid assessment, notice u/s. 143(2) is to be mandatorily issued against return filed by the assessee in response to the notice u/s. 148 of the Act. Reference was made to the decision of the Hon’ble Apex Court in the case of ACIT vs Hotel Blue Moon 321 ITR 362 (SC), CIT vs Rajeev Sharma 336 ITR 678,PCIT vs Staunch Marketing Pvt. Ltd. 404 ITR 299.

My attention was then drawn to the facts of the assessee having filed return in response to notice u/s 148 of the Act and no notice being issued by the AO u/s 143(2) of the Act before proceeding to frame assessment in the present case.

Drawing my attention to page 2 of the assessment order, she pointed out that the Assessing Officer noted the fact that the 4 & 1878/Ahd/2024 Kalpanaben Nayankumar Shah, A.Y. 2016-17 & 2017-18 assessee had filed return in response to the notice u/s. 148 of the Act but was unable to e-verify the same on account of system failure of the department itself and noting the said fact she pointed that the Assessing Officer noted further that on account of this the system did not allow the Assessing Officer to issue notice u/s. 143(2) as no valid return was in the system data base and therefore he proceeded to frame the assessment u/s. 144 of the Act. My attention was drawn to these facts at page 2 of the assessment order as under:-

Ld.Counsel for the assessee argued that failure of the system of the Department would not relieve the Assessing Officer from the discharge of his statutory duties.

Besides the above, she pointed that the fact of the matter is that the assessee was able to get return e-verified on the 28th 5 & 1878/Ahd/2024 Kalpanaben Nayankumar Shah, A.Y. 2016-17 & 2017-18 Feb, 2022 but despite the said fact the Assessing Officer still went ahead and framed assessment u/s. 147 of the Act without issuance of any notice u/s. 143(2) of the Act after one month i.e. 27th March, 2022. She pointed out the fact of the assessee having e-verified the return on 28th Feb, 2022 was brought to the notice of Assessing Officer during assessment proceedings vide letter filed by the assessee in response to the show cause notice issued by the Assessing Officer dated 16th March, 2022. She drew my attention to the assessee’s letter dated 23-03-22 placed at P.B page No.105 bringing out the said fact to the notice of the AO.

The ld. Departmental Representative was unable to controvert the factual contention of the ld. counsel for the assessee that e-verified return was filed by the assessee in the present case on 22nd Feb, 2022 which fact was brought to the notice of the Assessing Officer also during assessment proceedings and the fact remains that no notice u/s. 143(2) was issued to the assessee before framing the assessment u/s. 147 of the Act on 23rd March, 2022 by the Assessing Officer. The Ld.DR was also unable to distinguish the law said to be settled in this regard about the assessment order passed without issuance of the jurisdictional notice u/s. 143(2) of the Act being invalid. Though the ld. Departmental Representative relied on the findings of the Assessing Officer that the notice u/s. 143(2) could not be issued on account of the system not generating the said notice in the absence of e-verified return in the data base of the system.

In the light of the above undisputed facts before me that the assessee had filed return in response to the notice u/s. 148 6 & 1878/Ahd/2024 Kalpanaben Nayankumar Shah, A.Y. 2016-17 & 2017-18 of the Act in time but the same could not be e-verified on account of system failure at the end of the department that it was ultimately belatedly e-verified when the system was working and despite that no notice u/s. 143(2) was issued to the assessee before framing assessment u/s. 147 of the Act, and applying the settled proposition of law to the facts, I have no hesitation at all in holding that the assessment order framed is invalid in the absence of issuance of the mandatory jurisdictional notice u/s. 143(2) of the Act by the Assessing Officer. In the light of the same, the assessment order passed is set aside as invalid. Ground No. 1 is allowed .

The remaining grounds being academic in nature were neither argued before me nor are being adjudicated by me.

In effect, both the appeals of the assessee are allowed in above terms.