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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD
Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA No. 39/H/2020 Assessment Year: 2007-08 Asst. Commissioner of Vs. Saptagiri Grameena Income-tax, Bank, Chittoor. Circle – 1, Hyderabad. PAN – AAAJS 0279D (Appellant) (Respondent) Revenue by: Shri Rohit Mujumdar Assessee by: Shri K. Venkata Karthik Date of hearing: 06/01/2022 Date of pronouncement: 13/01/2022
O R D E R PER L.P. SAHU, A.M.: This appeal filed by the Revenue is directed against CIT(A), Tirupati’s order dated 05/11/2019 for AY 2007-08 involving proceedings u/s 144 of the Income Tax Act, 1961 ; in short “the Act on the following grounds of appeal: “1. The Order of the CIT(A) is opposed to the facts of the case and is therefore, bad in law.
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The learned CIT(A) ought to have considered the fact that the Authorised Representative, Sri K. Sumanth Kumar, Chartered Accountant of the assessee bank appeared on several occasions on 21.11.2013, 20.10.2014, 27.01.2015 and 16.02.2015, in response to notices issued u/s 143(2) of the Act and produced Form(s) No. 15G/15H/60 of only some of its customers. Further, the learned CIT (A) ought to have considered the fact that though the assessee bank's Authorised Representative sought adjournment repeatedly to submit the Form(s) No. 15G/15H/60 in respect of the remaining customers, he had eventually failed to submit the same. Therefore, it was incumbent upon the assessee to have submitted the details/documents, in full, to the Assessing Officer, within time. 3. The learned C!T(A), in his Order dated 05.11.2019, did not affirmatively invalidate the Assessment Order dated 30.03.2015 passed by the AO u/s 144 of the Act. This can be inferred from the Para - 2 (under Ground No. 2) of Page - 14 in the CIT(A)'s Order, a portion of which is reproduced below: "In this regard, considering the facts ft appears that the assessment order passed by the AO is invalid." 4. The CIT(A) ought to have appreciated that according to Section - 292BB of the LT. Act, 1961, the objection taken by the assessee and agreed upon by the learned CIT(A) in the latter's Order is not acceptable in view of the language employed in S.292BB of the Income-tax Act, 1961, which is reproduced below: “Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act which is required to be served upon him, has been duly served upon him in time in
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accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was- (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner; Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment. 5. Any other grounds of appeal that may be urged at the time of hearing.”
Briefly the facts of the case are that the assessee filed its return of income for the Asst. Year 2007-08 On 22.10.2007, declaring total income of Rs. 9,45,65,703/-, which was processed u/s.143(1) on 19.2.2008. Subsequently, the case was selected for scrutiny as per Board's guidelines in Clause 2(iv) (Refund exceeds Rs.5 lakhs]. In responses to the notices issued u/s 143(2), the AO passed order u/s 143(3) of the Act on 31/12/2009.
2.1 Later on the AO observed that the assessee has not complied with the provisions of section 194A of the Act while making interest payment of Rs. 22,24,42,000/-, payment of rent of Rs. 58,67,000/-, Expenditure towards advertisement and publicity of Rs. 1,34,000/- and payment towards law charges of Rs. 26,54,000/-. Accordingly, the AO
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issued notice u/s 148 to the assessee on 23/08/2013, against which, the assessee filed a letter dated 23/10/2013 stating that the return filed originally u/s 139 ,may be treated as return filed in response notice u/s 148. Thereafter, another notice u/s 143(2) was issued to the assessee on 12/11/2013 and in response to the said notice, Shri K. Sumanth Kumar appeared and filed details called for and the case adjourned to 24/02/2015. Thereafter, none appeared on behalf of the assessee and assessee failed to produce any other relevant details in support of its claim. Accordingly, the AO passed order u/s 144 of the act as per the material available before him and made disallowance u/s 40(a)(ia) for Rs. 3,20,91,000/-.
Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A) and before the CIT(A) the assessee has raised 9 grounds, out of which ground No. 2, is a technical ground, which reads as under: (2). The Assistant Commissioner of income Tax has grossly erred in completing the assessment to the best of his judgment u/s 144 in as much as he has never given a notice proposing the making of the assessment to the best of his judgment. He ought to have given a formal notice to the appellants coiling upon the appellants to show cause why the assessment should not be completed u/s 144 as stipulated in the first proviso to sec 144. In the absence of such a notice, the assessment made u/s 144 is null and void and as such the assessment made by the learned Assistant Commissioner of Income Tax is to be quashed.”
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With regard to the above ground, the assessee submitted before the CIT(A) as under:
Without prejudice to the aforesaid contention, appellants further pray that the learned assessing officer has grossly erred in choosing to make the assessment to the best of his judgement Vis. 144 in as much as the appellants were not given the notice proposing to make the assessment u/s. 144 as stipulated in the First proviso to Sec., 144. This is against the provisions of the act and natural justice as the assessee was denied the opportunity to put forth their objections to assessment being made u/s 144. In the absence of the notice intimating the appellants about the assessment being made Vis. 144, the assessment made by the learned assessing officer is null and void as it is against the provisions of the act and the appellants pray that the said assessment be quashed by this learned appellate authority.”
After considering the submissions of the assessee, the CIT(A) allowed the ground raised by the assessee by holding that the assessment order passed by the AO is invalid by observing as under: The appellant contended that without giving any show- cause proposing to do the best judgment assessment passing an order u/s.144 of the Act is null and void. It was contended that no formal notice was given by the AO for passing ex-parte order. In this connection, the assessment order has seen and found that there is no mention of issuance of notice u/s.142(1) of the Act before completion of the assessment. Similarly, no show-cause was issued to the appellant proposing disallowance by the AO before completion of the assessment, as per the order.
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On verification of the assessment record, it is noticed that the order sheet does not reveal endorsement with regard to issuance of notice u/s.142(1) of the Act or show-cause letter to the assessee since the inception of the reassessment proceedings till the completion of the assessment. It is also verified from the assessment record that no notice u/s.142(1) or show cause letter found place. The prerequisite for completing the assessment u/s.144 of the Act is issuance of notice u/s.142(1) of the Act or show cause letter. However, the AO failed in the respect and completed the best judgment assessment. The appellant claimed that without issuing notice u/s.142(1) or show cause letter proposing the additions and disallowances, before completion of the assessment, the same is invalid and null and void. In this regard, considering the facts it appears that the assessment order passed by the AO is invalid. Hence, this ground is 'allowed'.” 6. Aggrieved by the order of CIT(A), the revenue is in appeal before the ITAT.
We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. In this connection, we refer to the provisions of section 144 of the Act, which reads as under: “144. Best judgment assessment (1) 1 ] If any person- (a) fails to make the return required 2 under sub- section (1) of section 139] and has not made a return or a revised return under subsection (4) or sub- section (5) of that section,] or (b) fails to comply with all the terms of a notice issued under subsection (1) of section 142 3 or fails to comply with a direction issued under sub- section (2A) of that section], or (c) having made a return, fails to comply with all the terms of a notice issued under sub- section (2) of section 143, the 4 Assessing] Officer, after taking into account all relevant material which the 5 Assessing]
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Officer has gathered, 6 shall, after giving the assessee an opportunity of being heard, make the assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assessee 7 ] on the basis of such assessment: 8 Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub- section (1) of section 142 has been issued prior to the making of an assessment under this section.] (2) 9 The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988 ), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988 , or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.]
7.1 On perusal of the said section, it is clear that it is mandatory on the part of the AO to issue notice u/s 142(1) for completing the assessment u/s 144 of the Act. From the order of CIT(A), we find that no valid notice issued by the AO u/s 142(1) of the Act before completing the assessment u/s 144 of the Act, meaning thereby that the AO has not given any opportunity to the assessee by way of issue of valid notice before completing the assessment. Accordingly, the CIT(A) held that the assessment order is invalid. We are of the view that once the assessment is held as invalid on the technical ground, additions made in such assessment do not withstand. The ld. DR relied on the case laws, which are filed in the paper book at pages 1 to 9, are distinguishable on facts to the case of the assessee and, hence, the same are not of any help to the case of the revenue. Therefore, we find no reason to interfere with the
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order of the CIT(A) and upholding the same, we dismiss the grounds raised by the revenue.
In the result, appeal of the revenue is dismissed in above terms. Pronounced in the open court on 13th January, 2022.
Sd/- Sd/- (S.S. GODARA) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 13th January, 2022. kv Copy to : 1 ACIT, Circle – 1, No. 22, Aayakar Bhavan, K.T. Road, Tirupati, Chittoor Dist. 2 Saptagiri Grameena Bank, No. 7, Durga Complex, Naidu Buildings, Chittoor. 3 CIT(A), Tirupati 4 Pr. CIT, Tirupati. ITAT, DR, Hyderabad. 5 Guard File. 6